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Are classical option pricing models consistent with observed option second-order moments? Evidence from high-frequency data

Audrino, Francesco; Fengler, Matthias - School of Economics and Political Science, Universität … - 2013

We suggest a joint analysis of ex-post intra-day variability in an option and its associated underlying asset market as a novel means of validating an option pricing model. For this purpose, we introduce the notion of option realized variance, by which we mean the cumulative variance realized by...

Persistent link: https://www.econbiz.de/10010630436

Regime Switching Stochastic Volatility with Skew, Fat Tails and Leverage using Returns and Realized Volatility Contemporaneously

Trojan, Sebastian - School of Economics and Political Science, Universität … - 2013

A very general stochastic volatility (SV) model specification with leverage, heavy tails, skew and switching regimes is proposed, using realized volatility (RV) as an auxiliary time series to improve inference on latent volatility. The information content of the range and of implied volatility...

Persistent link: https://www.econbiz.de/10010905982

Modeling Intraday Stochastic Volatility and Conditional Duration Contemporaneously with Regime Shifts

Trojan, Sebastian - School of Economics and Political Science, Universität … - 2014

A high frequency stochastic volatility (SV) model is proposed. Price duration and associated absolute price change in event time are modeled contemporaneously to fully capture volatility on the tick level, combining the SV and stochastic conditional duration (SCD) model. Estimation is with IBM...

Persistent link: https://www.econbiz.de/10010886747

Volatility Forecasting: Downside Risk, Jumps and Leverage Effect

Audrino, Francesco; Hu, Yujia - School of Economics and Political Science, Universität … - 2011

price and volatility dynamics are examined using recently developed methodologies to detect jumps and to disentangle their … size from continuous return and continuous volatility. Granted that jumps in both return and volatility are important … components for generating the two effects, we find jumps in return can improve forecasts of volatility, while jumps in volatility …

Persistent link: https://www.econbiz.de/10009323017

Missing in Asynchronicity: A Kalman-EM Approach for Multivariate Realized Covariance Estimation

Corsi, Fulvio; Peluso, Stefano; Audrino, Francesco - School of Economics and Political Science, Universität … - 2012

Motivated by the need for an unbiased and positive-semidefinite estimator of multivariate realized covariance matrices, we model noisy and asynchronous ultra-high-frequency asset prices in a state-space framework with missing data. We then estimate the covariance matrix of the latent states...

Persistent link: https://www.econbiz.de/10009653426

Empirical pricing kernel estimation using a functional gradient descent algorithm based on splines

Audrino, Francesco; Meier, Pirmin - School of Economics and Political Science, Universität … - 2012

We propose a new methodology to estimate the empirical pricing kernel implied from option data. In contrast to most of the studies in the literature that use an indirect approach, i.e. first estimating the physical and risk-neutral densities and obtaining the pricing kernel in a second step, we...

Persistent link: https://www.econbiz.de/10010546947

Safe Haven Currencies

Ranaldo, Angelo; Söderlind, Paul - School of Economics and Political Science, Universität … - 2007

We study high-frequency exchange rate movements over the sample 1993-2006. We document that the (Swiss) franc, euro, Japanese yen and the pound tend to appreciate against the U.S. dollar when (a) S&P has negative returns; (b) U.S. bond prices increase; and (c) when currency markets become more...

Persistent link: https://www.econbiz.de/10005453979

Testing the lag structure of assets’ realized volatility dynamics

Audrino, Francesco; Camponovo, Lorenzo; Roth, Constantin - School of Economics and Political Science, Universität … - 2015

A (conservative) test is constructed to investigate the optimal lag structure for forecasting realized volatility dynamics. The testing procedure relies on the recent theoretical results that show the ability of the adaptive least absolute shrinkage and selection operator (adaptive lasso) to...

Persistent link: https://www.econbiz.de/10011154593

Semi-nonparametric estimation of the call price surface under strike and time-to-expiry no-arbitrage constraints

Fengler, Matthias; Hin, Lin-Yee - School of Economics and Political Science, Universität … - 2011

We suggest a semi-nonparametric estimator for the entire call price surface based on a tensor-product B-spline. To enforce no-arbitrage constraints in strike and calendar dimensions we establish sufficient no-arbitrage conditions on the control net of the tensor product (TP) B-spline. Since...

Persistent link: https://www.econbiz.de/10009322530

An Empirical Analysis of the Ross Recovery Theorem

Audrino, Francesco; Huitema, Robert; Ludwig, Markus - School of Economics and Political Science, Universität … - 2014

Building on the results of Ludwig (2012), we propose a method to construct robust time-homogeneous Markov chains that capture the risk-neutral transition of state prices from current snapshots of option prices on the S&P 500 index. Using the recovery theorem of Ross (2013), we then derive the...

Persistent link: https://www.econbiz.de/10010772959