Related papers: Functional quantization of rough volatility and ap…
Following an approach originally suggested by Balland in the context of the SABR model, we derive an ODE that is satisfied by normalized volatility smiles for short maturities under a rough volatility extension of the SABR model that…
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
This paper investigates how realized and option implied volatilities are related to the future quantiles of commodity returns. Whereas realized volatility measures ex-post uncertainty, volatility implied by option prices reveals the…
In the complex landscape of traditional futures trading, where vast data and variables like real-time Limit Order Books (LOB) complicate price predictions, we introduce the FutureQuant Transformer model, leveraging attention mechanisms to…
In this paper we examine the relation between market returns and volatility measures through machine learning methods in a high-frequency environment. We implement a minute-by-minute rolling window intraday estimation method using two…
The non-Markovian nature of rough volatility processes makes Monte Carlo methods challenging and it is in fact a major challenge to develop fast and accurate simulation algorithms. We provide an efficient one for stochastic Volterra…
This paper introduces one new multivariate volatility model that can accommodate an appropriately defined network structure based on low-frequency and high-frequency data. The model reduces the number of unknown parameters and the…
The LIBOR Market Model (LMM) is a widely used model for pricing interest rate derivatives. While the Black-Scholes model is well-known for pricing stock derivatives such as stock options, a larger portion of derivatives are based on…
Working on different aspects of algorithmic trading we empirically discovered a new market invariant. It links together the volatility of the instrument with its traded volume, the average spread and the volume in the order book. The…
The standard approach for compensating liquidity providers on many decentralized exchanges (DEX) for serving as counter-party to swaps is through charging a small percentage of fees. The expected payoff from the cash flow of this mode of…
Financial derivatives are contracts that can have a complex payoff dependent upon underlying benchmark assets. In this work, we present a quantum algorithm for the Monte Carlo pricing of financial derivatives. We show how the relevant…
This paper introduces novel volatility diffusion models to account for the stylized facts of high-frequency financial data such as volatility clustering, intra-day U-shape, and leverage effect. For example, the daily integrated volatility…
This article presents a generic framework for modeling the dynamics of forward curves in commodity market as commodity derivatives are typically traded by futures or forwards. We have theoretically demonstrated that commodity prices are…
In the over-the-counter market in derivatives, we sometimes see large numbers of traders taking the same position and risk. When there is this kind of concentration in the market, the position impacts the pricings of all other derivatives…
Recent advances in quantum computing have demonstrated its potential to significantly enhance the analysis and forecasting of complex classical data. Among these, quantum reservoir computing has emerged as a particularly powerful approach,…
We propose a probabilistic framework for pricing derivatives, which acknowledges that information and beliefs are subjective. Market prices can be translated into implied probabilities. In particular, futures imply returns for these implied…
For quantitative trading risk management purposes, we present a novel idea: the realized local volatility surface. Concisely, it stands for the conditional expected volatility when sudden market behaviors of the underlying occur. One is…
This is an informal and sketchy review of six topical, somewhat unrelated subjects in quantitative finance: rough volatility models; random covariance matrix theory; copulas; crowded trades; high-frequency trading & market stability; and…
The usage of a spot volatility estimate based on a volatility decomposition in a time-changed price-model according to the trading times is investigated. In this model clock-time volatility splits up into the product of tick-time volatility…
We consider properties of the measurement intensity $\rho$ of a random variable for which the probability density function represented by the corresponding Wigner function attains negative values on a part of the domain. We consider a…