Related papers: Short Maturity Asian Options for the CEV Model

We introduce a simple stochastic volatility model, whose novelty consists in taking into account hitting times of the asset price, and study the optimal stopping problem corresponding to a put option whose time horizon (after the asset…

We propose model-free (nonparametric) estimators of the volatility of volatility and leverage effect using high-frequency observations of short-dated options. At each point in time, we integrate available options into estimates of the…

The theme in this paper is the recombining binomial tree to price American put option when the underlying stock follows constant elasticity of variance(CEV) process. Recombining nodes of binomial tree are decided from finite difference…

There are no known exact formulas for the valuation of a number of exotic options, and this is particularly true for options under discrete monitoring and for American style options. Therefore, one usually recourses to a Monte Carlo…

We introduce a novel stochastic volatility model where the squared volatility of the asset return follows a Jacobi process. It contains the Heston model as a limit case. We show that the joint density of any finite sequence of log returns…

This study examines the adaptive market hypothesis (AMH) in Japanese stock markets (TOPIX and TSE2). In particular, we measure the degree of market efficiency by using a time-varying model approach. The empirical results show that (1) the…

Confidence intervals and joint confidence sets are constructed for the nonparametric calibration of exponential L\'evy models based on prices of European options. To this end, we show joint asymptotic normality in the spectral calibration…

We construct a sequence of functions that uniformly converge (on compact sets) to the price of Asian option, which is written on a stock whose dynamics follows a jump diffusion, exponentially fast. Each of the element in this sequence…

We study a new measure of codependency in the second moment of a continuous-time multivariate asset price process, which we name the realized copula of volatility. The statistic is based on local volatility estimates constructed from…

Systemic risk measures have been shown to be predictive of financial crises and declines in real activity. Thus, forecasting them is of major importance in finance and economics. In this paper, we propose a new forecasting method for…

Risk sensitive decision making finds important applications in current day use cases. Existing risk measures consider a single or finite collection of random variables, which do not account for the asymptotic behaviour of underlying…

We investigate statistical properties of the optimal value of the Sample Average Approximation of stochastic programs, continuing the study in Kr\"atschmer (2023). Central Limit Theorem type results are derived for the optimal value. As a…

The left tail of the implied volatility skew, coming from quotes on out-of-the-money put options, can be thought to reflect the market's assessment of the risk of a huge drop in stock prices. We analyze how this market information can be…

In this paper, we consider three stochastic-volatility models, each characterized by distinct dynamics of instantaneous volatility: (1) a CIR process for squared volatility (i.e., the classical Heston model); (2) a mean-reverting lognormal…

We consider quantile estimation using Markov chain Monte Carlo and establish conditions under which the sampling distribution of the Monte Carlo error is approximately Normal. Further, we investigate techniques to estimate the associated…

Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness,…

Dynamic hedging of an European option under a general local volatility model with small linear transaction costs is studied. A continuous control version of Leland's strategy that asymptotically replicates the payoff is constructed. An…

We develop a novel continuous-time asymptotic framework for inference on whether the predictive ability of a given forecast model remains stable over time. We formally define forecast instability from the economic forecaster's perspective…

We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…

This paper considers the problem of variable selection allowing for parameter instability. It distinguishes between signal and pseudo-signal variables that are correlated with the target variable, and noise variables that are not, and…