Related papers: Implied and Realized Volatility: A Study of the Ra…

Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…

We propose a random walk model of asset returns where the parameters depend on market stress. Stress is measured by, e.g., the value of an implied volatility index. We show that model parameters including standard deviations and…

A Bayesian procedure is developed for multivariate stochastic volatility, using state space models. An autoregressive model for the log-returns is employed. We generalize the inverted Wishart distribution to allow for different correlation…

We consider a multidimensional Ito semimartingale regularly sampled on [0,t] at high frequency 1/\Delta_n, with \Delta_n going to zero. The goal of this paper is to provide an estimator for the integral over [0,t] of a given function of the…

We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…

This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…

A novel approach for dynamic modeling and forecasting of realized covariance matrices is proposed. Realized variances and realized correlation matrices are jointly estimated. The one-to-one relationship between a positive definite…

In this paper we examine the relation between market returns and volatility measures through machine learning methods in a high-frequency environment. We implement a minute-by-minute rolling window intraday estimation method using two…

Connectedness measures the degree at which a time-series variable spills over volatility to other variables compared to the rate that it is receiving. The idea is based on the percentage of variance decomposition from one variable to the…

Forecasting the volatility of financial assets is essential for various financial applications. This paper addresses the challenging task of forecasting the volatility of financial assets with limited historical data, such as new issues or…

This paper introduces a methodology for constructing a market index composed of a liquid risky asset and a liquid risk-free asset that achieves a fixed target volatility. Existing volatility-targeting strategies typically scale portfolio…

Realization of uncertainty of prices is captured by volatility, that is the tendency of prices to vary along a period of time. This is generally measured as standard deviation of daily returns. In this paper we propose and investigate the…

We study the dependence of volatility on the stock price in the stochastic volatility framework on the example of the Heston model. To be more specific, we consider the conditional expectation of variance (square of volatility) under fixed…

In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…

We consider a square-integrable semimartingale and investigate the convex order relations between its discrete, continuous and predictable quadratic variation. As the main results, we show that if the semimartingale has conditionally…

In the first quarter of 2006 Chicago Board Options Exchange (CBOE) introduced, as one of the listed products, options on its implied volatility index (VIX). This created the challenge of developing a pricing framework that can…

Several studies have focused on the Realized Range Volatility, an estimator of the quadratic variation of financial prices, taking into account the impact of microstructure noise and jumps. However, none has considered direct modeling and…

This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in…

This paper examines the volatility and covariance dynamics of cash and futures contracts that underlie the Optimal Hedge Ratio (OHR) across different hedging time horizons. We examine whether hedge ratios calculated over a short term…

Volatility forecasts are key inputs in financial analysis. While lasso based forecasts have shown to perform well in many applications, their use to obtain volatility forecasts has not yet received much attention in the literature. Lasso…