We analyze the impact of funding costs and margin requirements on prices of index options traded on the CBOE. We propose a model that gives upper and lower bounds for option prices in the absence of arbitrage in an incomplete market with differential borrowing and lending rates. We show that...

We investigate price discovery over the 24-hour trading day for equities, currencies, bonds, and commodities. Sizable price discovery occurs around the clock for most assets. For a given asset, intraday risk and return distributions are fairly similar, indicating a broadly constant...

We reexamine the evolution of the idiosyncratic volatility (IV) of US firms between 1962 and 2016. We theoretically identify three fundamental drivers for the IV: market concentration, average variance, and average correlation. Exploring the separate impacts of these drivers on IV, we find that...

This paper shows that the VIX market contains information that is not already contained by the S&P 500 market on the variance of the S&P 500 returns. We estimate a flexible affine model based on a joint time series of underlying indexes and option prices on both markets. We find that including...

We introduce a new class of flexible and tractable matrix affine jump-diffusions (AJD) to model multivariate sources of financial risk. We first provide a complete transform analysis of this model class, which opens a range of new potential applications to, e.g., multivariate option pricing with...

[16] and [17] establish a VIX futures and option pricing theory when modeling S&P 500 index by using a stochastic volatility process with asset return and volatility jumps. In this note, we prove that Lin and Chang's formula is not an exact solution of their pricing equation. More generally, we...