We introduce a discrete-time model for log-return dynamics with observable volatility and jumps. Our proposal extends … the class of Realized Volatility heterogeneous auto-regressive gamma (HARG) processes adding a jump component with time … compensating for equity, volatility, and jump risks, the generating function under the risk-neutral measure inherits analytical …

In recent years there has been a remarkable growth of volatility options. In particular, VIX options are among the most … actively trading contracts at CBOE. These options exhibit upward sloping volatility skew and the shape of the skew is largely … independent of the volatility level. To take into account these stylized facts, this article introduces a novel two …

We construct multi-currency models with stochastic volatility and correlated stochastic interest rates with a full … interest rate by a stochastic volatility displaced-diffusion Libor Market Model [AA02], which can model an interest rate smile …

volatility level. Single-factor stochastic volatility models are not flexible enough to account for the stochastic behavior of … the skew. On the other hand, multifactor stochastic volatility models are able to account for the existence of stochastic … that the consideration of additional volatility factors in the context of stochastic volatility models allows us to …

We develop a discrete-time stochastic volatility option pricing model, which exploits the information contained in high …-frequency data. The Realized Volatility (RV) is used as a proxy of the unobservable log-returns volatility. We model its dynamics by … competing time-varying (i.e. GARCH-type) and stochastic volatility pricing models. The pricing improvement can be ascribed to …

point in time, the parameters of the model are estimated by minimizing the sum of squared implied volatility errors, and … their informational content is compared with the widely used Black and Scholes implied volatility, calculated on at … periods of high variability of asset prices the jump-diffusion approach may help to disentangle the cases in which volatility …

Derivatives, especially equity and volatility options, contain valuable and oftentimes essential information for … estimating stochastic volatility models. Absent strong assumptions, their typically highly nonlinear pricing dependence on the … jointly accounts for stock returns as well as prices of equity and volatility options. Finally, we provide numerical results …

significant price jump component in variance swap rates. A model-based analysis shows that investors' willingness to ensure … against volatility risk increases after a market drop. This effect is stronger for short horizons and more persistent for long …

advantages: i) ensures nonnegative interest rates, ii) easily accommodates unspanned factors affecting volatility and risk …, volatility, and risk premium dynamics — including when interest rates are close to the zero lower bound …