This paper examines continuous-time models for the price and volatility processes of individual stocks and the S … diffusive volatility innovations we find that the first principal component is highly correlated with index variance innovations …

We develop a discrete-time affine stochastic volatility model with time-varying conditional skewness (SVS). Importantly …, we disentangle the dynamics of conditional volatility and conditional skewness in a coherent way. Our approach allows … autoregressive conditional heteroskedasticity (GARCH), and stochastic volatility with jumps (SVJ) models. Our results are not due to …

that liquidity premium varies with the expected net stock return, return volatility and, to a lesser extent, with the …

stochastic volatility of asset prices and to give theoretical arguments for empirically well documented facts. We show that … stochastic volatility. …

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 …