This paper develops a two-step estimation methodology that allows us to apply catastrophe theory to stock market … returns with time-varying volatility and to model stock market crashes. In the first step, we utilize high-frequency data to … estimate daily realized volatility from returns. Then, we use stochastic cusp catastrophe on data normalized by the estimated …

The sum of squared intraday returns provides an unbiased and almost error-free measure of ex-post volatility. In this … paper we develop a nonlinear Autoregressive Fractionally Integrated Moving Average (ARFIMA) model for realized volatility …, which accommodates level shifts, day-of-the-week effects, leverage effects and volatility level effects. Applying the model …

model in several ways, it allows for all the primary stylized facts of financial asset returns, including volatility … volatility, but without the estimation problems associated with the latter, and being applicable in the multivariate setting for …

Many recent modelling advances in finance topics ranging from the pricing of volatility-based derivative products to … number of recent papers have addressed volatility predictability, some from the perspective of the usefulness of jumps in … forecasting volatility. Key papers in this area include Andersen, Bollerslev, Diebold and Labys (2003), Corsi (2004), Andersen …

When estimating and forecasting realized volatility in the presence of jumps, a form of bias-variance tradeoff is …

A Hidden Markov Model (HMM) is used to model the VIX (the Cboe Volatility Index). A 4- state Gaussian mixture is fitted … Hedge Index). The results presented here show promising application in modelling and predicting volatility, as well as … identifying current volatility regimes predominating the market …

of volatility in finance for portfolio allocation, derivative pricing and risk management. The method has a two … average realized volatility processes can achieve a convergence rate close to OP(n−4/9) , which is better than the convergence … based on average realized volatility processes indeed performs better than that based on the price processes. Empirically …