Technical paper/Volatility
The effects of transaction costs and illiquidity on the prices of volatility derivatives
This paper employs a PDE approach to price several volatility derivatives under different transaction costs and illiquidity models.
The step stochastic volatility model
Extreme short-dated skew can be obtained by decomposing it in two parts
Option pricing using high-frequency futures prices
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…
The price of Bitcoin: GARCH evidence from high-frequency data
This is the first paper that estimates the price determinants of Bitcoin in a generalized autoregressive conditional heteroscedasticity (GARCH) framework using high-frequency data.
Modeling realized volatility with implied volatility for the EUR/GBP exchange rate
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.
SABR smiles for RFR caplets
The SABR model for volatility is adapted to price risk-free rate caplets
A verification model to capture option risk and hedging based on a modified underlying beta
This paper analyzes the relationship between option risk and expected return from the perspective of the underlying beta, and estimates the degree of correlation.
Universalities in the dynamics of cryptocurrencies: stability, scaling and size
The authors explore the effects of market capitalization on the dynamics of cryptocurrencies within both returns and volatility networks and show that these cryptocurrencies exhibit scaling properties in volatility with respect to market capitalization.
Multi-curve Cheyette-style models with lower bounds on tenor basis spreads
A solution for a no-arbitrage condition in Cheyette-style models is proposed
Monetary policy uncertainty and jumps in advanced equity markets
The authors analyze the role of monetary policy uncertainty in predicting jumps in nine advanced equity markets.
Equally diversified or equally weighted?
New diversification measure enables construction of equally diversified portfolios
Fund size and the stability of portfolio risk
This paper examines the relationship between portfolio size and the stability of mutual fund risk measures, presenting evidence for economies of scale in risk management.
Benchmark reform goes non-linear
Terminating Libor will bring great challenges to the pricing of non-linear rate products
A new arbitrage-free parametric volatility surface
A new arbitrage-free volatility surface with closed-form valuation and local volatility is introduced
International announcements and West Texas Intermediate crude oil futures: a case study on the 2008 global financial crisis
The authors examine the impact of international monetary policy and professionals' announcements on West Texas Intermediate crude oil futures.
Volatility spillover along the supply chains: a network analysis on economic links
The analysis in this paper reveals that additional fundamental risk gets transferred along supply chains, and that suppliers are exposed to additional fundamental risk that is not captured by their market beta. Suppliers are therefore exposed to…
Range-based volatility forecasting: a multiplicative component conditional autoregressive range model
This paper proposes a multiplicative component CARR (MCCARR) model to capture the "long-memory" effect in volatility.
Old-fashioned parametric models are still the best: a comparison of value-at-risk approaches in several volatility states
The authors present backtesting results for 1% and 2.5% VaR of six indexes from emerging and developed countries using several of the best-known VaR models, including generalized autoregressive conditional heteroscedasticity (GARCH), extreme value theory…
The quadratic rough Heston model and the joint S&P 500/Vix smile calibration problem
A combination of rough volatility and price-feedback effect allows for SPX-Vix joint calibration
The joint S&P 500/Vix smile calibration puzzle solved
SPX and Vix derivatives are modelled jointly in an arbitrage-free setting
Volatility forecasting: the role of internet search activity and implied volatility
In this study, the authors search for a benchmark model with available market-based predictors to evaluate the net contribution of internet search activity data in forecasting volatility. The paper conducts in-sample analysis and out-of-sample…
The swap market Bergomi model
The combination of two popular volatility models sharpens the hedging of exotic rate derivatives
Stay ahead of the fixing lag
The price of fund-linked derivatives depends on the fixing lag of the underlying funds
A consistent investment strategy
This paper introduces a consistent performance strategy (CPS), which, if followed, leads to a portfolio having consistently positive returns over time and exhibiting a steady upward trend.