Related papers: Volatility models in practice: Rough, Path-depende…
We present a study of the short-maturity asymptotics for VIX and European option prices in local-stochastic volatility models with compound Poisson jumps. Both out-of-the-money (OTM) and at-the-money (ATM) asymptotics are considered. The…
We present a new methodology to analyze large classes of (classical and rough) stochastic volatility models, with special regard to short-time and small noise formulae for option prices. Our main tool is the theory of regularity structures,…
We introduce a fast and flexible Machine Learning (ML) framework for pricing derivative products whose valuation depends on volatility surfaces. By parameterizing volatility surfaces with the 5-parameter stochastic volatility inspired (SVI)…
We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to…
This paper introduces a Bayesian vector autoregression (BVAR) with stochastic volatility-in-mean and time-varying skewness. Unlike previous approaches, the proposed model allows both volatility and skewness to directly affect macroeconomic…
This dissertation develops and justifies a novel method for deriving approximate formulas to estimate two parameters in stochastic volatility diffusion models with exponentially-affine characteristic functions and single- or two-factor…
We propose a generic calibration framework to both vanilla and no-touch options for a large class of continuous semi-martingale models. The method builds upon the forward partial integro-differential equation (PIDE) derived in Hambly et al.…
Classical (It\^o diffusions) stochastic volatility models are not able to capture the steepness of small-maturity implied volatility smiles. Jumps, in particular exponential L\'evy and affine models, which exhibit small-maturity exploding…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
This paper considers possible price paths of a financial security in an idealized market. Its main result is that the variation index of typical price paths is at most 2, in this sense, typical price paths are not rougher than typical paths…
In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…
Given the promising results on joint modeling of SPX/VIX smiles of the recently introduced quadratic rough Heston model, we consider a multi-asset market making problem on SPX and its derivatives, e.g. VIX futures, SPX and VIX options. The…
Thanks to its solid theoretical foundation, the SHAP framework is arguably one the most widely utilized frameworks for local explainability of ML models. Despite its popularity, its exact computation is known to be very challenging, proven…
The most recent update of financial option models is American options under stochastic volatility models with jumps in returns (SVJ) and stochastic volatility models with jumps in returns and volatility (SVCJ). To evaluate these options,…
With uncertain changes of the economic environment, macroeconomic downturns during recessions and crises can hardly be explained by a Gaussian structural shock. There is evidence that the distribution of macroeconomic variables is skewed…
This work examines a stochastic volatility model with double-exponential jumps in the context of option pricing. The model has been considered in previous research articles, but no thorough analysis has been conducted to study its quality…
In this paper we consider the simulation-based Bayesian analysis of stochastic volatility in mean (SVM) models. Extending the highly efficient Markov chain Monte Carlo mixture sampler for the SV model proposed in Kim et al. (1998) and Omori…
We study the temporal fluctuations in time-dependent stock prices (both individual and composite) as a stochastic phenomenon using general techniques and methods of nonequilibrium statistical mechanics. In particular, we analyze stock price…
How to reconcile the classical Heston model with its rough counterpart? We introduce a lifted version of the Heston model with n multi-factors, sharing the same Brownian motion but mean reverting at different speeds. Our model nests as…
We consider a robust approach to address uncertainty in model parameters in Markov Decision Processes (MDPs), which are widely used to model dynamic optimization in many applications. Most prior works consider the case where the uncertainty…