We study a new class of three-factor affine option pricing models with interdependent volatility dynamics and a … stochastic skewness component unrelated to volatility shocks. These properties are useful in order (i) to model a term structure … of implied volatility skews more consistent with the data and (ii) to capture comovements of short and long term skews …

VIX options and target volatility options (TVOs) under affine GARCH models based on Gaussian and Inverse Gaussian …

pricing is the volatility of the underlying asset. Exchanges often overestimate volatility in order to cover any sudden … changes in market behavior, leading to systematic overpricing of derivatives. Accurate forecasting of volatility would expose … systematic overpricing. Unfortunately, volatility is not an easy phenomenon to predict or forecast. One class of models that have …