Related papers: Multi-asset Generalised Variance Swaps in Barndorf…
In this article, we apply the forward variance modeling approach by L.Bergomi to the co-terminal swap market model. We build an interest rate model for which all the market price changes of hedging instruments, interest rate swaps and…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
This paper develops and estimates a multivariate affine GARCH(1,1) model with Normal Inverse Gaussian innovations that captures time-varying volatility, heavy tails, and dynamic correlation across asset returns. We generalize the…
Correlations between asset returns are important in many financial applications. In recent years, multivariate volatility models have been used to describe the time-varying feature of the correlations. However, the curse of dimensionality…
In this chapter, we consider volatility swap, variance swap and VIX future pricing under different stochastic volatility models and jump diffusion models which are commonly used in financial market. We use convexity correction approximation…
In this paper we propose a multivariate quantile regression framework to forecast Value at Risk (VaR) and Expected Shortfall (ES) of multiple financial assets simultaneously, extending Taylor (2019). We generalize the Multivariate…
Recent developments in financial time series focus on modeling volatility across multiple assets or indices in a multivariate framework, accounting for potential interactions such as spillover effects. Furthermore, the increasing…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
This paper discusses and analyzes a class of likelihood models which are based on two distributional innovations in financial models for stock returns. That is, the notion that the marginal distribution of aggregate returns of log-stock…
We provide a simple explicit estimator for discretely observed Barndorff-Nielsen and Shephard models, prove rigorously consistency and asymptotic normality based on the single assumption that all moments of the stationary distribution of…
Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the…
Selecting the optimal Markowitz porfolio depends on estimating the covariance matrix of the returns of $N$ assets from $T$ periods of historical data. Problematically, $N$ is typically of the same order as $T$, which makes the sample…
We introduce a new set of consistent measures of risks, in terms of the semi-invariants of pdf's, such that the centered moments and the cumulants of the portfolio distribution of returns that put more emphasis on the tail the…
We introduce generalizations of the COGARCH model of Kl\"uppelberg et al. from 2004 and the volatility and price model of Barndorff-Nielsen and Shephard from 2001 to a Markov-switching environment. These generalizations allow for exogeneous…
We suggest two classes of multivariate GARCH--models which are both easy to estimate and perform well in forecasting the covariance matrix of more than one hundred stocks. We apply methods from random matrix theory (RMT) to determine the…
This paper addresses the importance of incorporating various risk measures in portfolio management and proposes a dynamic hybrid portfolio optimization model that combines the spectral risk measure and the Value-at-Risk in the mean-variance…
Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We introduce a…
We compute and discuss the Esscher martingale transform for exponential processes, the Esscher martingale transform for linear processes, the minimal martingale measure, the class of structure preserving martingale measures, and the minimum…
In this paper we develop numerical pricing methodologies for European style Exchange Options written on a pair of correlated assets, in a market with finite liquidity. In contrast to the standard multi-asset Black-Scholes framework, trading…
Portfolio allocation with gross-exposure constraint is an effective method to increase the efficiency and stability of selected portfolios among a vast pool of assets, as demonstrated in Fan et al (2008). The required high-dimensional…