Related papers: On the Skew Stickiness Ratio
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
Accurately characterizing the implied volatility curves is a central challenge in option pricing and risk management. The classical SABR model by Hagan et al. has been widely adopted in practice due to its well-defined stochastic volatility…
Kemeny's constant quantifies the expected time for a random walk to reach a randomly chosen vertex, providing insight into the global behavior of a Markov chain. We present a novel eigenvector-based formula for computing Kemeny's constant.…
We study the Heston model, where the stock price dynamics is governed by a geometrical (multiplicative) Brownian motion with stochastic variance. We solve the corresponding Fokker-Planck equation exactly and, after integrating out the…
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…
The Sharpe ratio is a way to compare the excess returns (over the risk free asset) of portfolios for each unit of volatility that is generated by a portfolio. In this paper we introduce a robust Sharpe ratio portfolio under the assumption…
A new robust class of multivariate skew distributions is introduced. Practical aspects such as parameter estimation method of the proposed class are discussed, we show that the proposed class can be fitted under a reasonable time frame. Our…
This paper studies the links between the descriptions of macroeconomic variables and statistical moments of market trade, price, and return. The randomness of market trade values and volumes during the averaging interval {\Delta} results in…
In this paper we propose a new stochastic model based on a generalization of semi-Markov chains to study the high frequency price dynamics of traded stocks. We assume that the financial returns are described by a weighted indexed…
Volatility of financial stock is referring to the degree of uncertainty or risk embedded within a stock's dynamics. Such risk has been received huge amounts of attention from diverse financial researchers. By following the concept of…
A stochastic dynamics has a natural decomposition into a drift capturing mean rate of change and a martingale increment capturing randomness. They are two statistically uncorrelated, but not necessarily independent mechanisms contributing…
A simple Hawkes model have been developed for the price tick structure dynamics incorporating market microstructure noise and trade clustering. In this paper, the model is extended with random mark to deal with more realistic price tick…
We investigate statistical properties of vorticity fluctuations in fully developed turbulence, which are known to exhibit a strong intermittent behavior. Taking as the starting point the Navier-Stokes equations with a random force term…
Distributions of strictly positive numbers are common and can be characterized by standard statistical measures such as mean, standard deviation, and skewness. We demonstrate that for these distributions the skewness $D_3$ is bounded from…
The stochastic leverage effect, defined as the standardized covariation between the returns and their related volatility, is analyzed in a stochastic volatility model set-up. A novel estimator of the effect is defined using a pre-estimation…
We present an explicit hedging strategy, which enables to prove arbitrageness of market incorporating at least two assets depending on the same random factor. The implied Black-Scholes volatility, computed taking into account the form of…
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
Although there is ample work in the literature dealing with skewness in the multivariate setting, there is a relative paucity of work in the matrix variate paradigm. Such work is, for example, useful for modelling three-way data. A matrix…
We introduce a novel stochastic volatility model where the squared volatility of the asset return follows a Jacobi process. It contains the Heston model as a limit case. We show that the joint density of any finite sequence of log returns…
We consider hedging of a contingent claim by a 'semi-static' strategy composed of a dynamic position in one asset and static (buy-and-hold) positions in other assets. We give general representations of the optimal strategy and the hedging…