Related papers: Volatility Shocks and Currency Returns
This paper tests whether graph neural networks improve realized volatility forecasts and whether those forecasts improve portfolio performance. Using weekly realized volatility for 465 S&P 500 equities from 2015-2025, Heterogeneous…
The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. The possibility of extreme price movements increases the risk of trading in electricity markets. However, underlying the…
The feasibility of XRP as a liquidity medium in cross-border transactions is assessed in this paper using a thorough stochastic framework. We use simulations of settlement latency, regime-switching volatility, and jump-diffusion models. The…
Volatility is a key measure of risk in financial analysis. The high volatility of one financial asset today could affect the volatility of another asset tomorrow. These lagged effects among volatilities - which we call volatility spillovers…
This paper investigates the time-varying impacts of international macroeconomic uncertainty shocks. We use a global vector autoregressive specification with drifting coefficients and factor stochastic volatility in the errors to model six…
We derive an explicit asymptotic approximation for the implied volatilities of Call options written on bonds assuming the short-rate is described by an affine short-rate model. For specific affine short-rate models, we perform numerical…
This paper proposes an empirical test of financial contagion in European equity markets during the tumultuous period of 2008-2011. Our analysis shows that traditional GARCH and Gaussian stochastic-volatility models are unable to explain two…
We present a systematic study of various statistical characteristics of high-frequency returns from the foreign exchange market. This study is based on six exchange rates forming two triangles: EUR-GBP-USD and GBP-CHF-JPY. It is shown that…
The existing publications demonstrate that the limit order book data is useful in predicting short-term volatility in stock markets. Since stocks are not independent, changes on one stock can also impact other related stocks. In this paper,…
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…
The decentralized international market of currency trading is a prototypical complex system having a highly heterogeneous composition. To understand the hierarchical structure relating the price movement of different currencies in the…
Portfolio optimisation typically aims to provide an optimal allocation that minimises risk, at a given return target, by diversifying over different investments. However, the potential scope of such risk diversification can be limited if…
We present a simple hybrid dynamical model as a tool to investigate behavioral strategies based on trend following. The multiplicative symbolic dynamics are generated using a lognormal diffusion model for the at-the-money implied volatility…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
Lead-lag relationships among assets represent a useful tool for analyzing high frequency financial data. However, research on these relationships predominantly focuses on correlation analyses for the dynamics of stock prices, spots and…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
Finance is about how the continuous stream of news gets incorporated into prices. But not all news have the same impact. Can one distinguish the effects of the Sept. 11, 2001 attack or of the coup against Gorbachev on Aug., 19, 1991 from…
Predicting the future evolution of complex systems is one of the main challenges in complexity science. Based on a current snapshot of a network, link prediction algorithms aim to predict its future evolution. We apply here link prediction…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
We study the dependence of volatility on the stock price in the stochastic volatility framework on the example of the Heston model. To be more specific, we consider the conditional expectation of variance (square of volatility) under fixed…