Related papers: Implied and Realized Volatility: A Study of Distri…
This paper derives explicit formulas for both the small and large time limits of the implied volatility in the minimal market model. It is shown that interest rates do impact on the implied volatility in the long run even though they are…
We consider a stochastic volatility asset price model in which the volatility is the absolute value of a continuous Gaussian process with arbitrary prescribed mean and covariance. By exhibiting a Karhunen-Lo\`{e}ve expansion for the…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
In this paper, we show that the halfspace depth random variable for samples from a univariate distribution with a notion of center is distributed as a uniform distribution on the interval [0,1/2]. The simplicial depth random variable has a…
This paper compares the accuracy of tail risk forecasts with a focus on including realized skewness and kurtosis in "additive" and "multiplicative" models. Utilizing a panel of 960 US stocks, we conduct diagnostic tests, employ scoring…
Statistical inference about the average effect in random-effects meta-analysis has been considered insufficient in the presence of substantial between-study heterogeneity. Predictive distributions are well-suited for quantifying…
We study the asymptotic normality of two feasible estimators of the integrated volatility of volatility based on the Fourier methodology, which does not require the pre-estimation of the spot volatility. We show that the bias-corrected…
This paper proposes an empirical test of financial contagion in European equity markets during the tumultuous period of 2008-2011. Our analysis shows that traditional GARCH and Gaussian stochastic-volatility models are unable to explain two…
To take sample biases and skewness in the observations into account, practitioners frequently weight their observations according to some marginal distribution. The present paper demonstrates that such weighting can indeed improve the…
Vanilla variational inference finds an optimal approximation to the Bayesian posterior distribution, but even the exact Bayesian posterior is often not meaningful under model misspecification. We propose predictive variational inference…
The coefficient of variation (CV) is commonly used to measure relative dispersion. However, since it is based on the sample mean and standard deviation, outliers can adversely affect the CV. Additionally, for skewed distributions the mean…
In this paper we study the short-time behavior of the at-the-money implied volatility for European and arithmetic Asian call options with fixed strike price. The asset price is assumed to follow the Bachelier model with a general stochastic…
The beta distribution is the best-known distribution for modelling doubly-bounded data, \eg percentage data or probabilities. A new generalization of the beta distribution is proposed, which uses a cubic transformation of the beta random…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
We study Pareto optimality in a decentralized peer-to-peer risk-sharing market where agents' preferences are represented by robust distortion risk measures that are not necessarily convex. We obtain a characterization of Pareto-optimal…
We investigate methods for forecasting multivariate realized covariances matrices applied to a set of 30 assets that were included in the DJ30 index at some point, including two novel methods that use existing (univariate) log of realized…
Using intraday data for the cross-section of individual stocks, we show that both transitory and persistent fluctuations in realized market and average idiosyncratic volatility, skewness and kurtosis are differentially priced in the…
The study of long-horizon returns has received a great deal of attention in recent years (see, for example, Boudoukh, Richardson, and Whitelaw (2008), Neuberger (2012) and Lee (2013), Fama and French (2018)). While most of the discussions…
This paper generalizes beta divergence beyond its classical form associated with power variance functions of Tweedie models. Generalized form is represented by a compact definite integral as a function of variance function of the…
For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…