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Calendar spread exchange options pricing with Gaussian random fields
Hainaut, Donatien - In: Risks : open access journal 6 (2018) 3, pp. 1-33
Most of the models leading to an analytical expression for option prices are based on the assumption that underlying asset returns evolve according to a Brownian motion with drift. For some asset classes like commodities, a Brownian model does not fit empirical covariance and autocorrelation...
Persistent link: https://www.econbiz.de/10011890768
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Pricing European currency options with high-frequency data
Le, Thi; Hoque, Ariful - In: Risks : open access journal 10 (2022) 11, pp. 1-15
-frequency data in research and practice. This study examines the performance of intraday implied volatility (IV) in estimating … pricing currency options. We use the Mincer-Zarnowitz regression test to analyse the volatility forecast power of IV for three … findings show that intraday IV is the key to accurately forecasting volatility and estimating currency options prices precisely …
Persistent link: https://www.econbiz.de/10014225987
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Foreign exchange futures trading and spot market volatility in Thailand
Woradee Jongadsayakul - In: Risks : open access journal 12 (2024) 7, pp. 1-20
This paper investigates how the introduction of foreign exchange futures has an impact on spot volatility and considers … the contemporaneous and dynamic relationship between spot volatility and foreign exchange futures trading activity … decreases spot volatility. It also increases the rate at which new information is impounded into spot prices but decreases the …
Persistent link: https://www.econbiz.de/10014637194
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Long run returns predictability and volatility with moving averages
Chang, Chia-Lin; Ilomäki, Jukka; Laurila, Hannu; … - In: Risks : open access journal 6 (2018) 4, pp. 1-18
This paper examines how the size of the rolling window, and the frequency used in moving average (MA) trading strategies, affects financial performance when risk is measured. We use the MA rule for market timing, that is, for when to buy stocks and when to shift to the risk-free rate. The...
Persistent link: https://www.econbiz.de/10011906234
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Mean-reverting 4/2 principal components model : financial applications
Escobar, Marcos; Gong, Zhenxian - In: Risks : open access journal 9 (2021) 8, pp. 1-23
volatility and a convenient principal component stochastic volatility (PCSV) decomposition for the stochastic covariance. We find …
Persistent link: https://www.econbiz.de/10012612366
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Parameter learning and change detection using a particle filter with accelerated adaptation
Gellert, Karol; Schlögl, Erik - In: Risks : open access journal 9 (2021) 12, pp. 1-18
shifts and stochastic volatility. The filter adapts to regime shifts extremely rapidly and delivers a clear heuristic for … distinguishing between regime shifts and stochastic volatility, even though the model dynamics assumed by the filter exhibit neither …
Persistent link: https://www.econbiz.de/10012794245
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A generative adversarial network approach to calibration of local stochastic volatility models
Cuchiero, Christa; Khosrawi, Wahid; Teichmann, Josef - In: Risks : open access journal 8 (2020) 4/101, pp. 1-31
We propose a fully data-driven approach to calibrate local stochastic volatility (LSV) models, circumventing in … particular the ad hoc interpolation of the volatility surface. To achieve this, we parametrize the leverage function by a family … be seen in the context of neural SDEs and (causal) generative adversarial networks: we generate volatility surfaces by …
Persistent link: https://www.econbiz.de/10012373082
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How does the volatility of volatility depend on volatility?
Rømer, Sigurd Emil; Poulsen, Rolf - In: Risks : open access journal 8 (2020) 2/59, pp. 1-18
We investigate the state dependence of the variance of the instantaneous variance of the S&P 500 index empirically. Time-series analysis of realized variance over a 20-year period shows strong evidence of an elasticity of variance of the variance parameter close to that of a log-normal model,...
Persistent link: https://www.econbiz.de/10012292915
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Effect of variance swap in hedging volatility risk
Shen, Yang - In: Risks : open access journal 8 (2020) 3/70, pp. 1-34
This paper studies the effect of variance swap in hedging volatility risk under the mean-variance criterion. We … consider two mean-variance portfolio selection problems under Heston's stochastic volatility model. In the first problem, the … variance swap can be used to hedge against the volatility risk. In the second problem, only the bank account and the stock can …
Persistent link: https://www.econbiz.de/10012293125
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Variance and interest rate risk in unit-linked insurance policies
Baños, David; Lagunas-Merino, Marc; Ortiz-Latorre, Salvador - In: Risks : open access journal 8 (2020) 3/84, pp. 1-23
this paper, we consider a general class of stochastic volatility models written in forward variance form. We also deal with … volatility model with a Vasicek interest rate model. …
Persistent link: https://www.econbiz.de/10012293269