Related papers: Volatility of Volatility and Leverage Effect from …
We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…
The coupled nonlinear volatility and option pricing model presented recently by Ivancevic is investigated, which generates a leverage effect, i.e., stock volatility is (negatively) correlated to stock returns, and can be regarded as a…
This paper investigates how the conditional quantiles of future returns and volatility of financial assets vary with various measures of ex-post variation in asset prices as well as option-implied volatility. We work in the flexible…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
We consider the problem of estimating the roughness of the volatility process in a stochastic volatility model that arises as a nonlinear function of fractional Brownian motion with drift. To this end, we introduce a new estimator that…
We study convexity and monotonicity properties of option prices in a model with jumps using the fact that these prices satisfy certain parabolic integro-differential equations. Conditions are provided under which preservation of convexity…
The effect of leverage on liquidity is a tool for analysing the level of liquidity for a given production process. It measures the sensitivity of the level of liquidity that results from changes in the volume of production and unit…
In the present paper, we first revisit the volatility estimation approach proposed by N. Kunitomo and S. Sato, and second, we show that the volatility estimator proposed by P. Malliavin and M.E. Mancino can be understood in a unified way by…
Statistical inference for stochastic processes based on high-frequency observations has been an active research area for more than a decade. One of the most well-known and widely studied problems is that of estimation of the quadratic…
Long Memory Stochastic volatility (LMSV) models capture two standardized features of financial data: the log-returns are uncorrelated, but their squares, or absolute values are (highly) dependent and they may have heavy tails. EGARCH and…
We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
Exposure measurement error is a ubiquitous but often overlooked challenge in causal inference with observational data. Existing methods accounting for exposure measurement error largely rely on restrictive parametric assumptions, while…
In recent years, there has been a substantive interest in rough volatility models. In this class of models, the local behavior of stochastic volatility is much more irregular than semimartingales and resembles that of a fractional Brownian…
The nonparametric estimation of the volatility and the drift coefficient of a scalar diffusion is studied when the process is observed at random time points. The constructed estimator generalizes the spectral method by Gobet, Hoffmann and…
Realized statistics based on high frequency returns have become very popular in financial economics. In recent years, different non-parametric estimators of the variation of a log-price process have appeared. These were developed by many…
We consider a microstructure model for a financial asset, allowing for price discreteness and for a diffusive behavior at large sampling scale. This model, introduced by Delattre and Jacod, consists in the observation at the high frequency…
In this paper, we relax the power parameter of instantaneous variance and develop a new stochastic volatility plus jumps model that generalize the Heston model and 3/2 model as special cases. This model has two distinctive features. First,…
Missing data is a common problem in finance and often requires methods to fill in the gaps, or in other words, imputation. In this work, we focused on the imputation of missing implied volatilities for FX options. Prior work has used…
We propose a simple continuous time model for modeling the lead-lag effect between two financial assets. A two-dimensional process $(X_t,Y_t)$ reproduces a lead-lag effect if, for some time shift $\vartheta\in \mathbb{R}$, the process…
We consider call option prices in diffusion models close to expiry, in an asymptotic regime ("moderately out of the money") that interpolates between the well-studied cases of at-the-money options and out-of-the-money fixed-strike options.…