Related papers: A note on VIX for postprocessing quantitative stra…
The Chicago Board Options Exchange Volatility Index (VIX) is calculated from SPX options and derivatives of VIX are also traded in market, which leads to the so-called ``consistent modeling" problem. This paper proposes a time-changed…
The Heston stochastic volatility model is arguably, the most popular stochastic volatility model used to price and risk manage exotic derivatives. In spite of this, it is not necessarily easy to calibrate to the market and obtain stable…
In this paper we formulate a regression problem to predict realized volatility by using option price data and enhance VIX-styled volatility indices' predictability and liquidity. We test algorithms including regularized regression and…
We investigate whether sophisticated volatility estimation improves the out-of-sample performance of mean-variance portfolio strategies relative to the naive 1/N strategy. The portfolio strategies rely solely upon second moments. Using a…
We consider the joint SPX-VIX calibration within a general class of Gaussian polynomial volatility models in which the volatility of the SPX is assumed to be a polynomial function of a Gaussian Volterra process defined as a stochastic…
Volatility is a natural risk measure in finance as it quantifies the variation of stock prices. A frequently considered problem in mathematical finance is to forecast different estimates of volatility. What makes it promising to use deep…
We discuss the pricing and hedging of volatility options in some rough volatility models. First, we develop efficient Monte Carlo methods and asymptotic approximations for computing option prices and hedge ratios in models where…
This research mainly explores the characteristics of different strategies and whether VIX INDEX positively influences the investment portfolio in any period. Our portfolio has six significant cryptocurrencies, VIX INDEX and gold. We perform…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to managing the Value at Risk (VaR) assuming a heavy tailed distribution of…
The fundamental theorem behind financial markets is that stock prices are intrinsically complex and stochastic. One of the complexities is the volatility associated with stock prices. Volatility is a tendency for prices to change…
Purpose: This study introduces a novel framework for identifying and exploiting predictive lead-lag relationships in financial markets. We propose an integrated approach that combines advanced statistical methodologies with machine learning…
We analyze correlations between squared volatility indices, VIX and VXO, and realized variances -- the known one, for the current month, and the predicted one, for the following month. We show that the ratio of the two is best fitted by a…
In this paper, we analyse the South African implied volatility in various setting. We assess the information content in SAVI implied volatility using daily markets data. Our empirical application is focused on the FTSE/JSE Top 40 index and…
We provided proof here that coefficient of variation (CV) is a direct measure of risk using an equation that has been derived here for the first time. We also presented a method to generate a stock CV based on return that strongly…
We consider stochastic volatility models using piecewise constant parameters. We suggest a hybrid optimization algorithm for fitting the models to a volatility surface and provide some numerical results. Finally, we provide an outlook on…
Cryptocurrency markets exhibit pronounced momentum effects and regime-dependent volatility, presenting both opportunities and challenges for systematic trading strategies. We propose AdaptiveTrend, a multi-component algorithmic trading…
A parsimonious generalization of the Heston model is proposed where the volatility-of-volatility is assumed to be stochastic. We follow the perturbation technique of Fouque et al (2011, CUP) to derive a first order approximation of the…
We study the finite horizon Merton portfolio optimization problem in a general local-stochastic volatility setting. Using model coefficient expansion techniques, we derive approximations for the both the value function and the optimal…
We propose a pairs trading model that incorporates a time-varying volatility of the Constant Elasticity of Variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…