Technical paper/Volatility
Timing minimum-variance investment in the Canadian stock market
This paper proposes a novel explanation of the variation in idiosyncratic volatility anomaly return and its use in minimum-variance investing in the Canadian stock market.
Option market-making and vol arbitrage
The agent’s view is factored in to a realised-vs-implied vol model
Earnings moves and pre-earnings implied volatility
The authors investigate the relationship between return realizations and pre-earnings implied volatility, finding the distribution of returns over earnings windows to be symmetrical.
Choosing trading strategies using importance sampling
The sampling technique is more efficient than A-B testing at comparing decision rules
Forecasting the Volatility Index with a realized measure, volatility components and dynamic jumps
The authors put forward the REGARCH-2C-Jump model to forecast VIX, with results suggesting that this model can outperform other models in VIX forecasting.
Bridging the gap risk reloaded: modelling wrong-way risk and leverage
A model extends the counterparty risk calculation to include nonlinear and complex portfolios
Volatility-sensitive Bayesian estimation of portfolio value-at-risk and conditional value-at-risk
The authors put forward a new means to integrate volatility information in the estimation of value-at-risk and conditional value-at-risk which is shown to be effective in risk estimation during volatile market conditions.
Does investors’ sentiment influence stock market volatility? Evidence from India during pre- and post-Covid-19 periods
The authors use data from during the Covid-19 pandemic to investigate the impact of investor sentiment on equity market volatility, finding negative news to have a stronger impact that positive news of the same magnitude.
Examining sustainability investments and financial performance of football clubs: an empirical analysis
The authors investigate how sustainability investments, financial leverage and growth rates impact the stock rate returns of football clubs.
Rethinking P&L attribution for options
A buy-side perspective on how to decompose the P&L of index options is presented
Infrequent MtM reduces neither value-at-risk nor backtesting exceptions
Frequency of repricing impacts volatility and correlation measures
Neural joint S&P 500/VIX smile calibration
A one-factor stochastic local volatility model can solve the joint calibration problem
Analytic risk-free rates option pricing with smile and skew
An arbitrage-free short-rate model for backward-looking compounded rates is presented
Smile-consistent basket skew
An analytic approximation for the implied volatility surface of basket options is introduced
A robust stochastic volatility model for interest rates
A swaption pricing model based on a single-factor Cheyette model is shown to fit accurately
Does the term structure of the at-the-money skew really follow a power law?
A power law can fit the ATM skew, but struggles with short maturities
The realized local volatility surface
The authors put forward a Bayesian nonparametric estimation method which reconstructs a counterfactual generalized Wiener measure from historical price data.
Time-varying higher moments, economic policy uncertainty and renminbi exchange rate volatility
The authors investigate how time-varying higher moments and economic policy uncertainty may be used for predicting the renminbi exchange rate volatility.