Default probability is a fundamental variable determining the credit worthiness of a firm and equity volatility estimation plays a key role in its evaluation. Assuming a structural credit risk modeling approach, we study the impact of choosing different non parametric equity volatility...

Equity returns and fi rm's default probability are strictly interrelated financial measures capturing the credit risk profi le of a fi rm. Following the idea proposed in [20] we use high-frequency equity prices in order to estimate the volatility risk component of a fi rm within Merton [17]...

The aim of this paper is to measure and assess the accuracy of different volatility estimators based on high frequency data in an option pricing context. For this, we use a discrete-time stochastic volatility model based on Auto-Regressive-Gamma (ARG) dynamics for the volatility.First, ARG...

We propose a new methodology based on Fourier analysis to estimate the fourth power of the volatility function (spot quarticity) and, as a byproduct, the integrated function. We prove the consistency of the proposed estimator of the integrated quarticity. Further, we analyse its efficiency in...

Availability of high frequency data has improved the capability of computing volatility in an efficient way. Nevertheless, measuring volatility/covariance from the observation of the asset price is challenging for two main reasons: observed asset prices are generally affected by noise...

The finite sample properties of the Fourier estimator of integrated volatility under market microstructure noise are studied. Analytic expressions for the bias and the mean squared error (MSE) of the contaminated estimator are derived. These formulae can be practically used to design optimal...

We consider an option pricing model proposed by, where the implementation of dynamic hedging strategies has a feedback impact on the price process of the underlying asset. We present numerical results showing that the smile and skewness patterns of implied volatility can actually be reproduced...