In this paper, we develop a financial stress index for France that can be used as a real-time composite indicator for the state of financial stability in France. We take 17 financial variables from different market segments and extract a common stress component using a dynamic approximate factor...

Asymmetric volatility in equity markets has been widely documented in finance (Bekaert and Wu (2000)). We study asymmetric volatility for daily Samp;P 500 index returns and VIX index changes, thereby examining the relation between extreme changes in risk-neutral volatility expectations, i.e....

Dependence is an important issue in credit risk portfolio modeling and pricing. We discuss a straightforward common factor model of credit risk dependence, which is motivated by intensity models such as Duffie and Singleton (1998), among others. In the empirical analysis, we study dependence...

The market's assessment of the underlying asset's volatility as reflected in the option price is known as the implied volatility. Implied volatility indexes were created with the idea to provide an investor fear gauge since they represent a forecast of future average volatility. This article...

This paper is the first illustrated review of literature on local and implied volatility. It presents and discusses both concepts that are central in risk management. If local volatility is a relatively recent concept, implied volatility has emerged in the 70's as a global measure of uncertainty...

The relation between risk and return is very well documented in financial literature. While Sharpe (1964) proposed a linear relation between risk and return through the CAPM, Black (1976) pointed out later an asymmetric relation between these variables. Indeed, he noted that volatility was...

This article is an empirical study dedicated to the GARCH Option pricing model of Duan (1995) applied to the FTSE 100 European style options for various maturities. The beauty of this model is in that it used the standard GARCH theory in an option perspective and also in its flexibility to adapt...

Corrado and Su (1998) implemented the stochastic volatility model of Hull and White (1988) for a particular case where variance is equal to its long-term mean. This note provides a slight correction to the series expansion derived by Corrado and Su (1998) and proposes a simulation to display the...

The mispricing of the deep-in-the money and deep-out-the-money generated by the Black-Scholes (1973) model is now well documented in the literature. In this paper, we discuss different option valuation models on the basis of empirical tests carry out on the French option market. We examine...

It is well known that finding an accurate forecast of future volatility turns out to be very useful for pricing derivatives, hedging strategies or for the calculation of the Value at Risk. The market's assessment of the underlying asset's volatility as reflected in the option price is known as...