volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent … returns and market microstructure noise, which feature prominently in the recent volatility literature. The cross-correlation … geometrically. If market makers are sufficiently risk averse, however, the cross-correlation pattern is inverted. Our results are …

-of-sample volatility of optimized portfolios from each model. A few factors capture the general covariance structure but adding more … yield similar results. Using a tracking error volatility criterion, larger differences appear, with particularly favorable …

base components (continuous, small jumps, large jumps), determine the relative magnitude of the components, and analyze the … finer characteristics of these components such as the degree of activity of the jumps. We extend the existing theory to …

pressure and increased volatility in financial markets. Pension funds increased cash holdings as a response. Our findings …

We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we … find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. In addition, we … find that stocks with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low average …

-at-risk constraints. The results also have strong implications for macro models where volatility affects investment decisions, suggesting …