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This paper develops a novel framework for modeling the variance swap of multi-asset portfolios by employing the generalized variance approach, which utilizes the determinant of the covariance matrix of the underlying assets. By specifying…
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…
We study the disequilibrium dynamics of a stylised model of production networks in which firms use perishable and non-substitutable intermediate inputs, so that adverse idiosyncratic productivity shocks can trigger downstream shortages and…
In February 2018, the VIX index has seen its largest ever increase and has lead to significant losses for some major volatility related products. Despite many efforts, the precise underlying reasons are yet to be discovered. We study the…
Weather and climate forecasts are inherently uncertain due to chaotic dynamics, imperfect initial conditions, and incomplete representation of the underlying physical processes. Operational ensemble forecasts aim to represent these…
We examine volatility of an Indian stock market in terms of aspects like participation, synchronization of stocks and quantification of volatility using the random matrix approach. Volatility pattern of the market is found using the BSE…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
Many economic environments involve units linked by a network. I develop an econometric framework that derives the dynamics of cross-sectional variables from the lagged innovation transmission along bilateral links and that can accommodate…
Penalized estimation methods for diffusion processes and dependent data have recently gained significant attention due to their effectiveness in handling high-dimensional stochastic systems. In this work, we introduce an adaptive…
This paper addresses the challenges faced in large-volume trading, where executing substantial orders can result in significant market impact and slippage. To mitigate these effects, this study proposes a volatility-volume-based order…
We propose a heterogeneous simultaneous graphical dynamic linear model (H-SGDLM), which extends the standard SGDLM framework to incorporate a heterogeneous autoregressive realised volatility (HAR-RV) model. This novel approach creates a…
We propose an enhancement to wholesale electricity markets whereby the exposure of consumers to increasingly large and volatile consumer payments arising as a byproduct of volatile real-time net loads -- i.e., loads minus renewable outputs…
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…
The viscous flow of two immiscible fluids in a porous medium on the Darcy scale is governed by a system of nonlinear parabolic equations. If infinite mobility of one phase can be assumed (e.g. in soil layers in contact with the atmosphere)…
We develop a novel observation-driven model for high-frequency prices. We account for irregularly spaced observations, simultaneous transactions, discreteness of prices, and market microstructure noise. The relation between trade durations…
Motivated by empirical evidence from the joint behavior of realized volatility time series, we propose to model the joint dynamics of log-volatilities using a multivariate fractional Ornstein-Uhlenbeck process. This model is a multivariate…
We present a tractable non-independent increment process which provides a high modeling flexibility. The process lies on an extension of the so-called Harris chains to continuous time being stationary and Feller. We exhibit constructions,…
Prediction markets rely on liquidity to convert trades into informative prices, yet existing mechanisms fix liquidity ex ante. This restriction enforces a static trade-off between price responsiveness and worst-case loss despite inherently…
This paper proposes swaps on two important new measures of generalized variance, namely the maximum eigen-value and trace of the covariance matrix of the assets involved. We price these generalized variance swaps for financial markets with…
Models trained under assumptions in the complete market usually don't take effect in the incomplete market. This paper solves the hedging problem in incomplete market with three sources of incompleteness: risk factor, illiquidity, and…