Related papers: Smile asymptotics for Bachelier implied volatility
We obtain an optimal exponential square integrability theorem for the Bergman projection of a function bounded by 1 in modulus. This is interpreted as the statement that the asymptotic tail variance of such a function is at most 1. The…
Let (RU_1, R U_2) be a given bivariate scale mixture random vector, with R>0 being independent of the bivariate random vector (U_1,U_2). In this paper we derive exact asymptotic expansions of the tail probability P{RU_1> x, RU_2> ax}, a \in…
We develop a dynamic version of the SSVI parameterisation for the total implied variance, ensuring that European vanilla option prices are martingales, hence preventing the occurrence of arbitrage, both static and dynamic. Insisting on the…
The Multi Variate Mixture Dynamics model is a tractable, dynamical, arbitrage-free multivariate model characterized by transparency on the dependence structure, since closed form formulae for terminal correlations, average correlations and…
This paper studies large sample properties of a Bayesian approach to inference about slope parameters $\gamma$ in linear regression models with a structural break. In contrast to the conventional approach to inference about $\gamma$ that…
In this paper we discuss the asymptotic behaviour of random contractions $X=RS$, where $R$, with distribution function $F$, is a positive random variable independent of $S\in (0,1)$. Random contractions appear naturally in insurance and…
Motivated by a bidimensional discrete-time risk model in insurance, we study the second-order asymptotics for two kinds of tail probabilities of the stochastic discounted value of aggregate net losses including two business lines. These are…
In this paper we study the short-time behavior of the at-the-money implied volatility for arithmetic Asian options with fixed strike price. The asset price is assumed to follow the Black-Scholes model with a general stochastic volatility…
We derive the asymptotic rate of decay to zero of the tail dependence of the bivariate skew Variance Gamma (VG) distribution under the equal-skewness condition, as an explicit regularly varying function. Our development is in terms of a…
The analysis of observed conditional distributions of both lagged and simultaneous intraday price increments of a basket of stocks reveals phenomena of dependence - induced volatility smile and kurtosis reduction. A model based on…
Let $X_{1},\ldots ,X_{n}$ be $n$ real-valued dependent random variables. With motivation from Mitra and Resnick (2009), we derive the tail asymptotic expansion for the weighted sum of order statistics $X_{1:n}\leq \cdots \leq X_{n:n}$ of…
The recent empirical work of Amaya et al. (2015) has pointed out that the realized skewness, which is the sample skewness of intraday high-frequency returns of a financial asset, serves as forecasting future returns in the cross-section.…
In this paper we study short-time behavior of the at-the-money implied volatility for Inverse European options with fixed strike price. The asset price is assumed to follow a general stochastic volatility process. Using techniques of the…
Financial time series exhibit a number of interesting properties that are difficult to explain with simple models. These properties include fat-tails in the distribution of price fluctuations (or returns) that are slowly removed at longer…
By using a probabilistic technique based on the exponential change of measure we find a precise tail asymptotic behavior of some perpetuities with distributions close to the Dickman distribution.
The Black-Scholes model gives vanilla Europen call option prices as a function of the volatility. We prove Lipschitz stability in the inverse problem of determining the implied volatility, which is a function of the underlying asset, from a…
We study the tail behavior of the distribution of the sum of asymptotically independent risks whose marginal distributions belong to the maximal domain of attraction of the Gumbel distribution. We impose conditions on the distribution of…
We study the asymptotic behavior of distribution densities arising in stock price models with stochastic volatility. The main objects of our interest in the present paper are the density of time averages of the squared volatility process…
In this paper we investigate the asymptotics of forward-start options and the forward implied volatility smile in the Heston model as the maturity approaches zero. We prove that the forward smile for out-of-the-money options explodes and…
The reflected process of a random walk or L\'evy process arises in many areas of applied probability, and a question of particular interest is how the tail of the distribution of the heights of the excursions away from zero behaves…