In this paper, we propose a parametric model of implied variance which is a natural generalization of the SVI model. The model improves the SVI by allowing more flexibly the negative curvature in the tails which is justified both theoretically and empirically. The fitting of the model, comparing...

In this paper, we study stationary states and mean first passage times (MFPT) of the square root process of Feller, the GARCH diffusion model. Asymptotic expansions of MFPT around the starting position and the boundary points of each process as well as the sensitivity analysis of FPT in a change...

Based on information signaling theory, this paper empirically shows that distribution effect matters for idiosyncratic volatility discount. Idiosyncratic volatility discount arises primarily among stocks with non-cash distributions. Such stocks show a significant idiosyncratic volatility...

We propose a term structure function, a two-factor variance process and a return process to jointly price SPX and VIX derivatives. The distinctive feature of the variance model is that the factor coefficients are time-varying and they are bonded with the term structure of variance swaps. The...