Related papers: Implied volatility surface predictability: the cas…
Diffusion Probabilistic Model (DDPM) for generating one-day-ahead arbitrage-free implied volatility surfaces. To capture the path-dependent nature of volatility dynamics, we condition our model on a set of market variables, including…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
We introduce a new approach for generating sequences of implied volatility (IV) surfaces across multiple assets that is faithful to historical prices. We do so using a combination of functional data analysis and neural stochastic…
After a brief review of option pricing theory, we introduce various methods proposed for extracting the statistical information implicit in options prices. We discuss the advantages and drawbacks of each method, the interpretation of their…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
Extracting implied information, like volatility and/or dividend, from observed option prices is a challenging task when dealing with American options, because of the computational costs needed to solve the corresponding mathematical problem…
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…
We introduce a multi-factor stochastic volatility model based on the CIR/Heston stochastic volatility process. In order to capture the Samuelson effect displayed by commodity futures contracts, we add expiry-dependent exponential damping…
Much of the trading activity in Equity markets is directed to brokerage houses. In exchange they provide so-called "soft dollars," which basically are amounts spent in "research" for identifying profitable trading opportunities. Soft…
We introduce a novel framework to financial time series forecasting that leverages causality-inspired models to balance the trade-off between invariance to distributional changes and minimization of prediction errors. To the best of our…
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…
This paper investigates short-term behaviors of implied volatility of derivatives written on indexes in equity markets when the index processes are constructed by using a ranking procedure. Even in simple market settings where stock prices…
Financial markets for Liquified Natural Gas (LNG) are an important and rapidly-growing segment of commodities markets. Like other commodities markets, there is an inherent spatial structure to LNG markets, with different price dynamics for…
An appropriate calibration and forecasting of volatility and market risk are some of the main challenges faced by companies that have to manage the uncertainty inherent to their investments or funding operations such as banks, pension funds…
Using machine learning and alternative data for the prediction of financial markets has been a popular topic in recent years. Many financial variables such as stock price, historical volatility and trade volume have already been through…
Stochastic volatility models describe asset prices $S_t$ as driven by an unobserved process capturing the random dynamics of volatility $\sigma_t$. Here, we quantify how much information about $\sigma_t$ can be inferred from asset prices…
We study a new measure of codependency in the second moment of a continuous-time multivariate asset price process, which we name the realized copula of volatility. The statistic is based on local volatility estimates constructed from…
We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to…
We show that the frequent claim that the implied tree prices exotic options consistently with the market is untrue if the local volatilities are subject to change and the market is arbitrage-free. In the process, we analyse -- in the most…
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…