Related papers: Volatility of Volatility and Leverage Effect from …
This paper proposes a new integrated variance estimator based on order statistics within the framework of jump-diffusion models. Its ability to disentangle the integrated variance from the total process quadratic variation is confirmed by…
The estimation of the volatility with high-frequency data is plagued by the presence of microstructure noise, which leads to biased measures. Alternative estimators have been developed and tested either on specific structures of the noise…
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…
When trading incurs proportional costs, leverage can scale an asset's return only up to a maximum multiple, which is sensitive to its volatility and liquidity. In a model with one safe and one risky asset, with constant investment…
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…
We introduce a local volatility model for the valuation of options on commodity futures by using European vanilla option prices. The corresponding calibration problem is addressed within an online framework, allowing the use of multiple…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
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…
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…
This study investigates the short-term asymptotic behavior of the implied volatility surface (IVS), with a particular focus on the at-the-money (ATM) skew and curvature, which are key determinants of the IVS shape and whose are widely…
Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in…
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…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
Recently a considerable interest has been paid on the estimation problem of the realized volatility and covolatility by using high-frequency data of financial price processes in financial econometrics. Threshold estimation is one of the…
We consider Stochastic Volatility processes with heavy tails and possible long memory in volatility. We study the limiting conditional distribution of future events given that some present or past event was extreme (i.e. above a level which…
Background: For complex financial systems, the negative and positive return-volatility correlations, i.e., the so-called leverage and anti-leverage effects, are particularly important for the understanding of the price dynamics. However,…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
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…
We consider the problem of estimating stochastic volatility for a class of second-order parabolic stochastic PDEs. Assuming that the solution is observed at a high temporal frequency, we use limit theorems for multipower variations and…
We statistically analyse a multivariate HJM diffusion model with stochastic volatility. The volatility process of the first factor is left totally unspecified while the volatility of the second factor is the product of an unknown process…