In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a …-form and structural models of stochastic volatility …

In recent years there has been a remarkable growth of volatility options. In particular, VIX options are among the most … actively trading contracts at CBOE. These options exhibit upward sloping volatility skew and the shape of the skew is largely … independent of the volatility level. To take into account these stylized facts, this article introduces a novel two …

We introduce a discrete-time model for log-return dynamics with observable volatility and jumps. Our proposal extends … the class of Realized Volatility heterogeneous auto-regressive gamma (HARG) processes adding a jump component with time … compensating for equity, volatility, and jump risks, the generating function under the risk-neutral measure inherits analytical …

stochastically correlated default intensities, or multivariate dynamic portfolio choice with volatility and correlation jumps. We … implied volatility skew term structures that are largely unrelated to the level and composition of the spot volatility. This … options. Second, we find that volatility and correlation jumps can imply an economically relevant intertemporal hedging demand …

We develop a novel method to decompose a straddle into a volatility risk portfolio and a jump risk portfolio. The …. We use the straddle decomposition to analyze the volatility risk premium and the jump risk premium embedded in a straddle … volatility risk portfolio persistently generates positive returns during earnings announcement periods …

In this paper, we propose a new Heston based stochastic volatility model for stock price and option pricing, which not … only captures the volatility smile, but also naturally captures the stochastic volatility of volatility. It's more …

stochastic volatility of asset prices and to give theoretical arguments for empirically well documented facts. We show that … stochastic volatility. …

closely and has certain other advantages. Second, we introduce a volatility index that provides a lower bound on the market …

We introduce Implied Volatility Duration (IVD) as a new measure for the timing of uncertainty resolution, with a high …