Related papers: Implied and Realized Volatility: A Study of Distri…

Accurately characterizing the implied volatility curves is a central challenge in option pricing and risk management. The classical SABR model by Hagan et al. has been widely adopted in practice due to its well-defined stochastic volatility…

In this paper, we propose a new jump robust quantile-based realised variance measure of ex-post return variation that can be computed using potentially noisy data. The estimator is consistent for the integrated variance and we present…

Option prices encode the market's collective outlook through implied density and implied volatility. An explicit link between implied density and implied volatility translates the risk-neutrality of the former into conditions on the latter…

We show that the moments of the distribution of historic stock returns are in excellent agreement with the Heston model and not with the multiplicative model, which predicts power-law tails of volatility and stock returns. We also show that…

We present a new class of Bayesian dynamic models for bivariate price-realized volatility time series in financial forecasting. A novel dynamic gamma process model adopted for realized volatility is integrated with traditional Bayesian…

In this paper, we implement and test two types of market-based models for European-type options, based on the tangent Levy models proposed recently by R. Carmona and S. Nadtochiy. As a result, we obtain a method for generating Monte Carlo…

Economic and financial theories and practice essentially deal with uncertain future. Humans encounter uncertainty in different kinds of activity, from sensory-motor control to dynamics in financial markets, what has been subject of…

The growth of the exhange-traded fund (ETF) industry has given rise to the trading of options written on ETFs and their leveraged counterparts {(LETFs)}. We study the relationship between the ETF and LETF implied volatility surfaces when…

In this paper, we consider the forecast evaluation of realized volatility measures under cross-section dependence using equal predictive accuracy testing procedures. We evaluate the predictive accuracy of the model based on the augmented…

The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…

Predicting the S&P 500 index volatility is crucial for investors and financial analysts as it helps assess market risk and make informed investment decisions. Volatility represents the level of uncertainty or risk related to the size of…

We propose a new variational approximation of the joint posterior distribution of the log-volatility in the context of large Bayesian VARs. In contrast to existing approaches that are based on local approximations, the new proposal provides…

Equity basket correlation can be estimated both using the physical measure from stock prices, and also using the risk neutral measure from option prices. The difference between the two estimates motivates a so-called "dispersion strategy''.…

Realized moments of higher order computed from intraday returns are introduced in recent years. The literature indicates that realized skewness is an important factor in explaining future asset returns. However, the literature mainly…

This paper considers the issue of modeling fractional data observed in the interval [0,1), (0,1] or [0,1]. Mixed continuous-discrete distributions are proposed. The beta distribution is used to describe the continuous component of the model…

Value at risk (VaR) is a risk measure that has been widely implemented by financial institutions. This paper measures the correlation among asset price changes implied from VaR calculation. Empirical results using US and UK equity indexes…

We address the construction of Realized Variance (RV) forecasts by exploiting the hierarchical structure implicit in available decompositions of RV. By using data referred to the Dow Jones Industrial Average Index and to its constituents we…

First, we show that implied normal volatility is intimately linked with the incomplete Gamma function. Then, we deduce an expansion on implied normal volatility in terms of the time-value of a European call option. Then, we formulate an…

We investigate the data-driven discovery of parametric representations for implied volatility slices. Using symbolic regression, we search for simple analytic formulas that approximate the total implied variance as a function of…

This paper analyzes the benefits of sampling intraday returns in intrinsic time for the realized variance (RV) estimator. We theoretically show in finite samples that depending on the permitted sampling information, the RV estimator is most…