We study the real-time characteristics and drivers of jumps in option prices. To this end, we employ high frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are uncorrelated with jumps in the...

Spreads of agency mortgage-backed securities (MBS) vary significantly in the cross section and over time, but the sources of this variation are not well understood. We document that, in the cross section, MBS spreads adjusted for the prepayment option show a pronounced smile with respect to the...

We investigate the effect of including variance derivatives as calibration and hedging instruments for pricing and hedging exotic structures. This is studied empirically using market data for SPX and VIX derivatives applied in a stochastic volatility jump diffusion model

A bank's stock price is modeled as a call option on the spread of random assets over random liabilities. The logarithm of assets and liabilities are jointly modeled as driven by four variance gamma processes and this model is estimated by calibrating to quoted equity options seen as compound...

Financial markets exhibit high levels of volatility. Volatile markets are usually associated with high risks and uncertain investment returns. Financial institutions therefore, usually opt to hedge their investment portfolios against the high volatility using a suitable hedging structure. One...

This paper empirically examines whether asset's liquidity can help resolve the known strike-price biases of the Black-Scholes model for different liquidity measures based on trading volume, bid-ask spread and the Amihud's ILLIQ. Our results indicate that, when the underlying asset or its...

People by and large tend to postpone their present consumption for numerous reasons. This postponement of consumption leaves them with surplus money to invest for future consumption. Amongst the number of alternatives avenues present for such investments, gold too tends to be one of them. People...

In the past decade, financial institutions have assumed an ever greater role in energy derivatives (or “paper”) markets. Numerous recent studies provide novel evidence of this “financialization” and analyze the extent to which it helps explain an important aspect of the distribution of...

In the past decade, financial institutions have assumed an ever greater role in energy derivatives (or “paper”) markets. Numerous recent studies provide novel evidence of this “financialization” and analyze the extent to which it helps explain an important aspect of the distribution of...

Skewness is specifically considered to develop semi-parametric upper bounds for option prices and expected payoffs for call options. Bounds on variance default swaps, a new asset, and for the variance risk premium are derived.The Technical Proof for this paper is available at the following URL:...