Related papers: Dynamic Skewness in Stochastic Volatility Models: …
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with…
We develop a dynamic factor stochastic volatility-in-mean (SVM) specification for vector autoregressions (VARs) that embeds an SVM component within a dynamic factor stochastic volatility structure. A small number of latent volatility…
Volatility is a key variable in option pricing, trading and hedging strategies. The purpose of this paper is to improve the accuracy of forecasting implied volatility using an extension of genetic programming (GP) by means of dynamic…
Volatility is a quantity of measurement for the price movements of stocks or options which indicates the uncertainty within financial markets. As an indicator of the level of risk or the degree of variation, volatility is important to…
The R package stochvol provides a fully Bayesian implementation of heteroskedasticity modeling within the framework of stochastic volatility. It utilizes Markov chain Monte Carlo (MCMC) samplers to conduct inference by obtaining draws from…
We propose a fast and flexible method to scale multivariate return volatility predictions up to high-dimensions using a dynamic risk factor model. Our approach increases parsimony via time-varying sparsity on factor loadings and is able to…
Sparse covariates are frequent in classification and regression problems and in these settings the task of variable selection is usually of interest. As it is well known, sparse statistical models correspond to situations where there are…
We present a scheme for sequential decision making with a risk-sensitive objective and constraints in a dynamic environment. A neural network is trained as an approximator of the mapping from parameter space to space of risk and policy with…
We discuss Bayesian forecasting of increasingly high-dimensional time series, a key area of application of stochastic dynamic models in the financial industry and allied areas of business. Novel state-space models characterizing sparse…
Statistical node clustering in discrete time dynamic networks is an emerging field that raises many challenges. Here, we explore statistical properties and frequentist inference in a model that combines a stochastic block model (SBM) for…
In this article, we propose a simple method to perform variable selection as a post model-fitting exercise using continuous shrinkage priors such as the popular horseshoe prior. The proposed Signal Adaptive Variable Selector (SAVS) approach…
Stochastic volatility (SV) models are nonlinear state-space models that enjoy increasing popularity for fitting and predicting heteroskedastic time series. However, due to the large number of latent quantities, their efficient estimation is…
Regime-switching models, in particular Hidden Markov Models (HMMs) where the switching is driven by an unobservable Markov chain, are widely-used in financial applications, due to their tractability and good econometric properties. In this…
We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…
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 extend the classical mean-variance (MV) framework and propose a robust and sparse portfolio selection model incorporating an ellipsoidal uncertainty set to reduce the impact of estimation errors and fixed transaction costs to penalize…
We formulate a discrete-time Bayesian stochastic volatility model for high-frequency stock-market data that directly accounts for microstructure noise, and outline a Markov chain Monte Carlo algorithm for parameter estimation. The methods…
The recently introduced class of simultaneous graphical dynamic linear models (SGDLMs) defines an ability to scale on-line Bayesian analysis and forecasting to higher-dimensional time series. This paper advances the methodology of SGDLMs,…
Stochastic volatility models, where the volatility is a stochastic process, can capture most of the essential stylized facts of implied volatility surfaces and give more realistic dynamics of the volatility smile/skew. However, they come…