The paper analyzes the robustness of stable volatility strategies, i.e. strategies in which the portfolio weight of the stock is inversely proportional to its local volatility. These strategies are optimal for a CRRA investor if the stock follows a diffusion process, the expected excess return...

Human beliefs, while always remaining in equilibrium, serve as a an equilibrium selector and determine the degree of aggregate volatility. Fully rational and risk averse economic agents expect macro-level dynamics to be characterized by a specific degree of volatility. Given this expectation the...

This study provides evidence on the common determinants for two prominent features of equity market volatility: its persistence over time and its asymmetric dependence on past returns. We show that daily volatility persistence increases with current returns, especially negative returns. It...

The ad hoc Black-Scholes (AHBS) model is one of the most widely used option valuation models among practitioners models. The main contribution of this study is methodological. We have two main results: (1) we make the empirical observation that typically the call and put sneers are discontinuous...

Understanding the pattern of stock market volatility is important to investors as well as for investment policy. Volatility is directly associated with risks and returns, higher the volatility the more financial market is unstable. The volatility of the Zimbabwean stock market is modeled using...