Extreme relative cost of tail risk hedging is driven by flows more than fear
To capture the commonality in idiosyncratic volatility, the authors propose a novel multivariate generalized autoregressive conditional heteroscedasticity (GARCH) model called dynamic factor correlation (DFC).
EU carbon certificates show lower volatility and higher netting than Basel approach assumes
History of op risk suggests economic impacts of climate change could exacerbate losses, writes op risk head
Worst-case losses would have wiped out the CCP’s available liquid resources on one day in Q1
This paper employs a PDE approach to price several volatility derivatives under different transaction costs and illiquidity models.
How the Libor transition inspired NatWest quant’s latest paper on exotic derivatives valuation
Adverse weather in February stressed the Texas power grid to the point of failure, leaving millions without power and resulting in many firms filing for bankruptcy. While this event had some unique circumstances, extreme events are becoming more frequent
There seems little logic to the price of meme assets – but bold investors can protect themselves, says tech expert
Extreme short-dated skew can be obtained by decomposing it in two parts
The authors examine two potential routes to improve the outcome of option pricing: extracting the variance from futures prices instead of the underlying asset prices, and calculating the variance in different frequencies with intraday data instead of…
Even prior to the Covid-19 pandemic, insider threats were reported to be increasing with 48% of firms indicating that incidents were on the rise within their organisations. Where are so many firms going astray?
Short volatility players try to box clever after strategy’s Covid rout
This is the first paper that estimates the price determinants of Bitcoin in a generalized autoregressive conditional heteroscedasticity (GARCH) framework using high-frequency data.
This paper concerns the application of implied volatility in modeling realized volatility in the daily, weekly and monthly horizon using high-frequency data for the EUR/GBP exchange rate.
Fears of moral hazard after CCP waives billions in margin demands following meme-stock volatility
Some of the trickiest puzzles in finance could be solved by blending old and new technologies
‘Rough volatility’ models promise better pricing and hedging of options. But will they catch on?
Investors should switch between factors as alphas change, says quant
In the most realistic simulations, data-driven approach fared 30% worse than conventional hedging
The SABR model for volatility is adapted to price risk-free rate caplets
This paper analyzes the relationship between option risk and expected return from the perspective of the underlying beta, and estimates the degree of correlation.
Copulas can still deliver if chosen with due attention to intuition and data, says quant fund chair
Volatility products could see more wild swings as dearth of vol sellers exacerbates spikes