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We consider the frequency and correlation of extreme return observations or “jumps” across equities, Treasury bonds, corporate bonds, currencies, commodities, and real estate. Understanding more about jumps is important to investors as diversification across asset classes is diminished if...
Persistent link: https://www.econbiz.de/10012933005
We apply a two-step strategy to forecast the dynamics of the volatility surface implicit in option prices to all …-post volatility of the minimum-variance portfolio is lower when compared with the equal-weighted portfolio and a minimum …
Persistent link: https://www.econbiz.de/10014235957
systematically with the volatility of stock returns. We allow for correlation between stock returns and their volatility (so …
Persistent link: https://www.econbiz.de/10012705869
We introduce a stochastic volatility model with self-exciting jump intensity to capture the change in pricing dynamic …
Persistent link: https://www.econbiz.de/10013088630
We introduce a stochastic volatility model with self-exciting jump intensity to capture the change in pricing dynamic …
Persistent link: https://www.econbiz.de/10010206966
In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a …-form and structural models of stochastic volatility …
Persistent link: https://www.econbiz.de/10011412294
This paper proposes a new approach to measure premiums for volatility and jump risks in option markets. These risks are … captured by a multi-factor jump-diffusion model for the joint evolution of the underlying and the implied volatility surface … variables such as the volatility and jump-intensity of the underlying. This allows us to dynamically calibrate these variables …
Persistent link: https://www.econbiz.de/10013049255
tractable. The approach allows for simultaneous calibration to market volatility surfaces of currency triangles, and also gives …
Persistent link: https://www.econbiz.de/10012963076
We propose a consistent and computationally efficient 2-step methodology for the estimation of multidimensional non-Gaussian asset models built using Lévy processes. The proposed framework allows for dependence between assets and different tail-behaviors and jump structures for each asset. Our...
Persistent link: https://www.econbiz.de/10012937321
This paper addresses several theoretical and practical issues in option pricing and implied volatility calibration in a … volatility term structure when the Hurst exponent is not 0.5, and also that one-year implied volatility is independent of Hurst … exponent and equivalent to fractional volatility. Building on these observations, we introduce a novel 8-parameter fractional …
Persistent link: https://www.econbiz.de/10012969066