The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for …

which succeeds with high probability. -- Hedging ; superhedging ; Neyman Pearson lemma ; stochastic volatility ; value at …

state dependent diffusion volatility following the constant elasticity of variance (CEV) process for the variables of … constant volatility (zero elasticity) assumption of earlier studies. We find that the elasticity is significantly different … from zero for most of the firms in our sample, and that the CEV model performs much better than constant volatility in …

In this work we introduce the notion of implied Core Equity Tier 1 volatility and the concept of a risk …-adjusted distance to trigger. Using a derivatives-based valuation approach, we are able to derive the implied CET1 volatility from the … convertibles issued by the same bank and sharing a similar contractual CET1 trigger, have almost identical implied CET1 volatility …

CAPM in periods of increasing aggregate volatility and thereby provide a hedge against aggregate volatility risk. The … aggregate volatility risk factor can explain the abnormal return differential between high and low disagreement firms. This … return differential is higher for firms with abundant real options, and this fact can be explained by aggregate volatility …

future returns. We argue that these firms have negative alphas because they are a hedge against expected aggregate volatility …, and the aggregate volatility risk factor can largely explain the high RSI effect. The key mechanism is that high RSI firms … more valuable as idiosyncratic volatility goes up. Idiosyncratic volatility usually increases with aggregate volatility (i …

volatility specifications and/or jumps.In the yield curve literature it is widely accepted that one-factor is not sufficient to …-factor stochastic volatility specification within the structural model of credit risk. One of the factors determines the correlation …-term returns and variance. The numerical tests reveal how the introduction of two volatility factors can generate a wide range of …