Related papers: Realized Local Volatility Surface
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…
This paper is concerned with the estimation of the volatility process in a stochastic volatility model of the following form: $dX_t=a_tdt+\sigma_tdW_t$, where $X$ denotes the log-price and $\sigma$ is a c\`adl\`ag semi-martingale. In the…
We introduce a novel multi-factor Heston-based stochastic volatility model, which is able to reproduce consistently typical multi-dimensional FX vanilla markets, while retaining the (semi)-analytical tractability typical of affine models…
We apply convex regularization techniques to the problem of calibrating the local volatility surface model of Dupire taking into account the practical requirement of discrete grids and noisy data. Such requirements are the consequence of…
Forecasting the volatility of financial assets is essential for various financial applications. This paper addresses the challenging task of forecasting the volatility of financial assets with limited historical data, such as new issues or…
Multiscale stochastic volatility models have been developed as an efficient way to capture the principle effects on derivative pricing and portfolio optimization of randomly varying volatility. The recent book Fouque, Papanicolaou, Sircar…
A technique for on-line estimation of spot volatility for high-frequency data is developed. The algorithm works directly on the transaction data and updates the volatility estimate immediately after the occurrence of a new transaction.…
Realised volatility has become increasingly prominent in volatility forecasting due to its ability to capture intraday price fluctuations. With a growing variety of realised volatility estimators, each with unique advantages and…
In the stochastic volatility models for multivariate daily stock returns, it has been found that the estimates of parameters become unstable as the dimension of returns increases. To solve this problem, we focus on the factor structure 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…
Many physical datasets are generated by collections of instruments that make measurements at regular time intervals. For such regular monitoring data, we extend the framework of half-spectral covariance functions to the case of…
In this article we look at stochastic processes with uncertain parameters, and consider different ways in which information is obtained when carrying out observations. For example we focus on the case of a the random evolution of a traded…
As a forward-looking measure of future equity market volatility, the VIX index has gained immense popularity in recent years to become a key measure of risk for market analysts and academics. We consider discrete reported intraday VIX tick…
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…
We consider stochastic volatility dynamics driven by a general H\"older continuous Volterra-type noise and with unbounded drift. For these so-called SVV-models, we consider the explicit computation of quadratic hedging strategies. While the…
This paper introduces a methodology for constructing a market index composed of a liquid risky asset and a liquid risk-free asset that achieves a fixed target volatility. Existing volatility-targeting strategies typically scale portfolio…
Jumps and market microstructure noise are stylized features of high-frequency financial data. It is well known that they introduce bias in the estimation of volatility (including integrated and spot volatilities) of assets, and many methods…
Volatility-based trading strategies have attracted a lot of attention in financial markets due to their ability to capture opportunities for profit from market dynamics. In this article, we propose a new volatility-based trading strategy…
Viscoelastic surface rheology plays an important role in multiphase systems. A typical example is the actin cortex which surrounds most animal cells. It shows elastic properties for short time scales and behaves viscous for longer time…
We investigate the joint dynamics of spot and implied volatility from an empirical perspective. We focus on the equity market with the SPX Index our underlying of choice. Using only observable quantities, we extract the instantaneous…