Related papers: Volatility conditional on price trends
The drift burst hypothesis postulates the existence of short-lived locally explosive trends in the price paths of financial assets. The recent U.S. equity and treasury flash crashes can be viewed as two high-profile manifestations of such…
Guyon and Lekeufack recently proposed a path-dependent volatility model and documented its excellent performance in fitting market data and capturing stylized facts. The instantaneous volatility is modeled as a linear combination of two…
Volatility is a key measure of risk in financial analysis. The high volatility of one financial asset today could affect the volatility of another asset tomorrow. These lagged effects among volatilities - which we call volatility spillovers…
The measures of roughness of the volatility in the litterature are based on the realized volatility of high frequency data. Some authors show that this leads to a biased estimate, and does not necessarily indicate roughness of the…
We present compelling empirical evidence for a new interpretation of the Forward Rate Curve (FRC) term structure. We find that the average FRC follows a square-root law, with a prefactor related to the spot volatility, suggesting a…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
Transformer models have become increasingly popular in financial applications, yet their potential risk making and biases remain under-explored. The purpose of this work is to audit the reliance of the model on volatile data for…
An extensive empirical literature documents a generally negative correlation, named the "leverage effect," between asset returns and changes of volatility. It is more challenging to establish such a return-volatility relationship for jumps…
An average instantaneous cross-correlation function is introduced to quantify the interaction of the financial market of a specific time. Based on the daily data of the American and Chinese stock markets, memory effect of the average…
This paper mainly utilizes the ARDL model and principal component analysis to investigate the relationship between the volatility of China's Shanghai Composite Index returns and the variables of exchange rate and domestic and foreign bond…
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…
This paper introduces a novel quantile approach to harness the high-frequency information and improve the daily conditional quantile estimation. Specifically, we model the conditional standard deviation as a realized GARCH model and employ…
We study the martingale property and moment explosions of a signature volatility model, where the volatility process of the log-price is given by a linear form of the signature of a time-extended Brownian motion. Excluding trivial cases, we…
This paper investigates short-term behaviors of implied volatility of derivatives written on indexes in equity markets when the index processes are constructed by using a ranking procedure. Even in simple market settings where stock prices…
In the over-the-counter market in derivatives, we sometimes see large numbers of traders taking the same position and risk. When there is this kind of concentration in the market, the position impacts the pricings of all other derivatives…
We study the statistical properties of volatility---a measure of how much the market is likely to fluctuate. We estimate the volatility by the local average of the absolute price changes. We analyze (a) the S&P 500 stock index for the…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…
We introduce a novel GARCH model that integrates two sources of uncertainty to better capture the rich, multi-component dynamics often observed in the volatility of financial assets. This model provides a quasi closed-form representation 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…