Related papers: Understanding Short-Term Implied Volatility Dynami…
We extend upon the saddle-point equation presented in [1] to derive large-time model-implied volatility smiles, providing its theoretical foundation and studying its applications in classical models. As long as characteristic function…
This paper investigates the structural dynamics of stock market volatility through the Financial Chaos Index, a tensor- and eigenvalue-based measure designed to capture realized volatility via mutual fluctuations among asset prices.…
It is well know that, in the short maturity limit, the implied volatility approaches the integral harmonic mean of the local volatility with respect to log-strike, see [Berestycki et al., Asymptotics and calibration of local volatility…
This paper provides an insight to the time-varying dynamics of the shape of the distribution of financial return series by proposing an exponential weighted moving average model that jointly estimates volatility, skewness and kurtosis over…
We propose an alternative approach towards cost mitigation in volatility-managed portfolios based on smoothing the predictive density of an otherwise standard stochastic volatility model. Specifically, we develop a novel variational Bayes…
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 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.…
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…
Rough volatility models are continuous time stochastic volatility models where the volatility process is driven by a fractional Brownian motion with the Hurst parameter smaller than half, and have attracted much attention since a seminal…
The instrumental variables (IV) method is a method for making causal inferences about the effect of a treatment based on an observational study in which there are unmeasured confounding variables. The method requires a valid IV, a variable…
The lifted Heston model is a stochastic volatility model emerging as a Markovian lift of the rough Heston model and the class of rough volatility processes. The model encodes the path dependency of volatility on a set of N square-root state…
We propose new nonparametric estimators of the integrated volatility of an It\^{o} semimartingale observed at discrete times on a fixed time interval with mesh of the observation grid shrinking to zero. The proposed estimators achieve the…
In modern data analysis, it is common to select a model before performing statistical inference. Selective inference tools make adjustments for the model selection process in order to ensure reliable inference post selection. In this paper,…
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…
We propose a randomised version of the Heston model-a widely used stochastic volatility model in mathematical finance-assuming that the starting point of the variance process is a random variable. In such a system, we study the small-and…
We consider the short time behaviour of stochastic systems affected by a stochastic volatility evolving at a faster time scale. We study the asymptotics of a logarithmic functional of the process by methods of the theory of homogenisation…
In the present work, a novel second-order approximation for ATM option prices is derived for a large class of exponential L\'{e}vy models with or without Brownian component. The results hereafter shed new light on the connection between…
Ideas by Statistical Mechanics (ISM) is a generic program to model evolution and propagation of ideas/patterns throughout populations subjected to endogenous and exogenous interactions. The program is based on the author's work in…
A new robust stochastic volatility (SV) model having Student-t marginals is proposed. Our process is defined through a linear normal regression model driven by a latent gamma process that controls temporal dependence. This gamma process is…
Gulisashvili et al. [Quant. Finance, 2018, 18(10), 1753-1765] provide a small-time asymptotics for the mass at zero under the uncorrelated stochastic-alpha-beta-rho (SABR) model by approximating the integrated variance with a moment-matched…