Related papers: Multiple Subordinated Modeling of Asset Returns
In this paper we propose a general derivative pricing framework which employs decoupled time-changed (DTC) L\'evy processes to model the underlying asset of contingent claims. A DTC L\'evy process is a generalized time-changed L\'evy…
This paper models stochastic process of price time series of CSI 300 index in Chinese financial market, analyzes volatility characteristics of intraday high-frequency price data. In the new generalized Barndorff-Nielsen and Shephard model,…
We propose a clustered local projection (clustered LP) method to estimate impulse response functions in a class of time-varying models where parameter variation is linked to a low-dimensional matrix of observables. We show that the…
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…
We introduce a simple model for equity index derivatives. The model generalizes well known L\`evy Normal Tempered Stable processes (e.g. NIG and VG) with time dependent parameters. It accurately fits Equity index implied volatility surfaces…
Local volatility is a versatile option pricing model due to its state dependent diffusion coefficient. Calibration is, however, non-trivial as it involves both proposing a hypothesis model of the latent function and a method for fitting it…
We construct a general stochastic process and prove weak convergence results. It is scaled in space and through the parameters of its distribution. We show that our simplified scaling is equivalent to time scaling used frequently. The…
A Hidden Markov Model for intraday momentum trading is presented which specifies a latent momentum state responsible for generating the observed securities' noisy returns. Existing momentum trading models suffer from time-lagging caused by…
We develop at-the-money call-price and implied volatility asymptotic expansions in time to maturity for a class of asset-price models whose log returns follow a L\'evy process. Under mild assumptions placing the driving L\'evy process in…
Time series momentum strategies are widely applied in the quantitative financial industry and its academic research has grown rapidly since the work of Moskowitz, Ooi and Pedersen (2012). However, trading signals are usually obtained via…
For many externally driven complex systems neither the noisy driving force, nor the internal dynamics are a priori known. Here we focus on systems for which the time dependent activity of a large number of components can be monitored,…
The distribution of the return intervals $\tau$ between volatilities above a threshold $q$ for financial records has been approximated by a scaling behavior. To explore how accurate is the scaling and therefore understand the underlined…
We introduce a general class of stochastic processes driven by a multifractional Brownian motion (mBm) and study the estimation problems of their pointwise H\"older exponents (PHE) based on a new localized generalized quadratic variation…
We propose a model for equity trading in a population of agents where each agent acts to achieve his or her target stock-to-bond ratio, and, as a feedback mechanism, follows a market adaptive strategy. In this model only a fraction of…
We measure the influence of different time-scales on the dynamics of financial market data. This is obtained by decomposing financial time series into simple oscillations associated with distinct time-scales. We propose two new time-varying…
Financial time series exhibit a number of interesting properties that are difficult to explain with simple models. These properties include fat-tails in the distribution of price fluctuations (or returns) that are slowly removed at longer…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
A central problem of Quantitative Finance is that of formulating a probabilistic model of the time evolution of asset prices allowing reliable predictions on their future volatility. As in several natural phenomena, the predictions of such…
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…
Classical option pricing schemes assume that the value of a financial asset follows a geometric Brownian motion (GBM). However, a growing body of studies suggest that a simple GBM trajectory is not an adequate representation for asset…