Related papers: Implied and Realized Volatility: A Study of Distri…
For testing goodness of fit it is very popular to use either the chi square statistic or G statistics (information divergence). Asymptotically both are chi square distributed so an obvious question is which of the two statistics that has a…
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…
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…
We examine whether model-based spot volatility estimators extracted from traded options data enhance the predictive power of the Heterogeneous Autoregressive (HAR) model for realized volatility. Specifically, we infer spot volatility under…
We analyze historic S&P500 multi-day returns: from daily returns to those accumulated over up to ten days. Despite symmetry breaking between gains and losses in the distribution of returns, resulting in its positive mean and negative skew,…
We consider a microstructure model for a financial asset, allowing for price discreteness and for a diffusive behavior at large sampling scale. This model, introduced by Delattre and Jacod, consists in the observation at the high frequency…
Several asymptotic results for the implied volatility generated by a rough volatility model have been obtained in recent years (notably in the small-maturity regime), providing a better understanding of the shapes of the volatility surface…
In the stochastic volatility models for multivariate daily stock returns, it has been found that the estimates of parameters become unstable as the dimension of returns increases. To solve this problem, we focus on the factor structure of…
We show how bad and good volatility propagate through forex markets, i.e., we provide evidence for asymmetric volatility connectedness on forex markets. Using high-frequency, intra-day data of the most actively traded currencies over 2007 -…
Variational inference is becoming more and more popular for approximating intractable posterior distributions in Bayesian statistics and machine learning. Meanwhile, a few recent works have provided theoretical justification and new…
Multivariate stochastic volatility models with skew distributions are proposed. Exploiting Cholesky stochastic volatility modeling, univariate stochastic volatility processes with leverage effect and generalized hyperbolic skew…
Cross-sectional dispersion in firm-level realized skewness is significantly and negatively related to future stock market returns. The predictive power of skewness dispersion is robust to in-sample and out-of-sample estimation and is…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
In this study, we constructed daily high-frequency sentiment data and used the VAR method to attempt to predict the next day's implied volatility surface. We utilized 630,000 text data entries from the East Money Stock Forum from 2014 to…
In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…
This article aims to introduced a new lifetime distribution named as exponentiated xgamma distribution (EXGD). The new generalization obtained from xgamma distribution, a special finite mixture of exponential and gamma distributions. The…
Using a large dataset on major FX rates, we test the robustness of the rough fractional volatility model over different time scales, by including smoothing and measurement errors into the analysis. Our findings lead to new stylized facts in…
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…
In this paper we find and develop a stochastic integral representation for the class of strictly stable distributions. We establish an explicit relationship between stochastic integral and shot-noise series representations of strictly…
This article proposes a calibration framework for complex option pricing models that jointly fits market option prices and the term structure of variance. Calibrated models under the conventional objective function, the sum of squared…