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This paper proposes a Skewed Stochastic Volatility (SSV) model to model time varying, asymmetric forecast distributions … volatility and asymmetric measurement densities. Estimating the model based on US data yields conditional forecast densities that …
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A Parisian option is a variant of a barrier option such that its payment is activated or deactivated only if the underlying asset remains above or below a barrier over a certain amount of time. We show that its complex payoff feature can cause dynamic hedging to fail. As an alternative, we...
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