Related papers: Implied and Realized Volatility: A Study of the Ra…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…
We investigate the behavior of systems of interacting diffusion processes, known as volatility-stabilized market models in the mathematical finance literature, when the number of diffusions tends to infinity. We show that, after an…
The beta model is the most important distribution for fitting data with the unit interval. However, the beta distribution is not suitable to model bimodal unit interval data. In this paper, we propose a bimodal beta distribution constructed…
The aim of the present work is to investigate the performances of a specific Bayesian control chart used to compare two processes. The chart monitors the ratio of the percentiles of a key characteristic associated with the processes. The…
With the increasing volume of high-frequency data in the information age, both challenges and opportunities arise in the prediction of stock volatility. On one hand, the outcome of prediction using tradition method combining stock technical…
Volatility is a key measure of risk in financial analysis. The high volatility of one financial asset today could affect the volatility of another asset tomorrow. These lagged effects among volatilities - which we call volatility spillovers…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
The paper studies estimation of parameters of diffusion market models from historical data. The standard definition of implied volatility for these models presents its value as an implicit function of several parameters, including the…
We consider implied volatilities in asset pricing models, where the discounted underlying is a strict local martingale under the pricing measure. Our main result gives an asymptotic expansion of the right wing of the implied volatility…
We analyze the performance of RiskMetrics, a widely used methodology for measuring market risk. Based on the assumption of normally distributed returns, the RiskMetrics model completely ignores the presence of fat tails in the distribution…
Volatility measures the amplitude of price fluctuations. Despite it is one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility…
We discovered that past changes in the market correlation structure are significantly related with future changes in the market volatility. By using correlation-based information filtering networks we device a new tool for forecasting the…
Realized statistics based on high frequency returns have become very popular in financial economics. In recent years, different non-parametric estimators of the variation of a log-price process have appeared. These were developed by many…
This paper tests whether graph neural networks improve realized volatility forecasts and whether those forecasts improve portfolio performance. Using weekly realized volatility for 465 S&P 500 equities from 2015-2025, Heterogeneous…
We develop a procedure for forecasting the volatility of a time series immediately following a news shock. Adapting the similarity-based framework of Lin and Eck (2020), we exploit series that have experienced similar shocks. We aggregate…
A volatility surface is an important tool for pricing and hedging derivatives. The surface shows the volatility that is implied by the market price of an option on an asset as a function of the option's strike price and maturity. Often,…
We study the shapes of the implied volatility when the underlying distribution has an atom at zero and analyse the impact of a mass at zero on at-the-money implied volatility and the overall level of the smile. We further show that the…
Implied volatility IV is a key metric in financial markets, reflecting market expectations of future price fluctuations. Research has explored IV's relationship with moneyness, focusing on its connection to the implied Hurst exponent H. Our…
In this paper, we develop a 4/2 stochastic volatility plus jumps model, namely, a new stochastic volatility model including the Heston model and 3/2 model as special cases. Our model is highly tractable by applying the Lie symmetries theory…
In a financial market model, we consider the variance-optimal semi-static hedging of a given contingent claim, a generalization of the classic variance-optimal hedging. To obtain a tractable formula for the expected squared hedging error…