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Predictability hidden by anomalous observations

Camponovo, Lorenzo; Scaillet, Olivier; Trojani, Fabio - 2013

- and out-of-sample, using predictive variables such as the dividend yield or the volatility risk premium …

Persistent link: https://www.econbiz.de/10009721331

Broda, Simon A.; Haas, Markus; Krause, Jochen; … - 2011

A new model class for univariate asset returns is proposed which involves the use of mixtures of stable Paretian distributions, and readily lends itself to use in a multivariate context for portfolio selection. The model nests numerous ones currently in use, and is shown to outperform all its...

Persistent link: https://www.econbiz.de/10009313940

Realizing smiles: pricing options with realized volatility

Corsi, Fulvio; Fusari, Nicola; Vecchia, Davide la - 2010

We develop a discrete-time stochastic volatility option pricing model, which exploits the information contained in high …-frequency data. The Realized Volatility (RV) is used as a proxy of the unobservable log-returns volatility. We model its dynamics by … competing time-varying (i.e. GARCH-type) and stochastic volatility pricing models. The pricing improvement can be ascribed to …

Persistent link: https://www.econbiz.de/10003973052

Collateral Smile

Leippold, Markus; Su, Lujing - 2011

prices, which translates into skew and smile patterns for implied volatility curves even under constant volatilities … the market. collateral requirements, funding costs, volatility smile, option pricing …

Persistent link: https://www.econbiz.de/10009375107

Uniform integrability of a single jump local martingale with state-dependent characteristics

Schatz, Michael; Sornette, Didier - 2017

We investigate a deterministic criterion to determine whether a diffusive local martingale with a single jump and state-dependent characteristics is a uniformly integrable martingale. We allow the diffusion coefficient, the jump hazard rate and the relative jump size to depend on the state and...

Persistent link: https://www.econbiz.de/10011762245

Consistent re-calibration in yield curve modeling : an example

Wüthrich, Mario V. - 2015

Popular yield curve models include affine term structure models. These models are usually based on a fixed set of parameters which is calibrated to the actual financial market conditions. Under changing market conditions also parametrization changes. We discuss how parameters need to be updated...

Persistent link: https://www.econbiz.de/10011412102

Implied volatility changes and corporate bond returns

Cao, Jie Jay; Goyal, Amit; Ke, Sai; Zhan, Xintong - 2019

Corporate bonds with large increases in implied volatility over the past month underperform those with large decreases … in implied volatility by 0.6% per month. In contrast to An, Ang, Bali, and Cakici (2014) who show that implied volatility … changes carry information about fundamental news, our evidence suggests that implied volatility changes contain information …

Persistent link: https://www.econbiz.de/10012179498

Estimation of large dimensional conditional factor models in finance

Gagliardini, Patrick; Ossola, Elisa; Scaillet, Olivier - 2019 - This version: August 2019

This chapter surveys recent econometric methodologies for inference in large dimensional conditional factor models in finance. Changes in the business cycle and asset characteristics induce time variation in factor loadings and risk premia to be accounted for. The growing trend in the use of...

Persistent link: https://www.econbiz.de/10012101166

A penalized two-pass regression to predict stock returns with time-varying risk premia

Bakalli, Gaetan; Guerrier, Stéphane; Scaillet, Olivier - 2021

We develop a penalized two-pass regression with time-varying factor loadings. The penalization in the first pass enforces sparsity for the time-variation drivers while also maintaining compatibility with the no arbitrage restrictions by regularizing appropriate groups of coefficients. The second...

Persistent link: https://www.econbiz.de/10012487589

A consistent model of "explosive" financial bubbles with mean-reversing residuals

Lin, Li; Ren, Ruoen; Sornette, Didier - 2009

We present a self-consistent model for explosive financial bubbles, which combines a mean-reverting volatility process … started at least 4 years earlier. We confirm the validity and universality of the volatility-confined LPPL model on seven …

Persistent link: https://www.econbiz.de/10003970340