This chapter surveys the methods available for extracting forward-looking information from option prices. We consider volatility, skewness, kurtosis, and density forecasting. More generally, we discuss how any forecasting object which is a twice differentiable function of the future realization...

We explore intraday transaction records from NASDAQ OMX Commodities Europe from January 2006 to October 2013. We analyze empirical results for a selection of existing realized measures of volatility and incorporate them in a Realized GARCH framework for the joint modeling of returns and realized...

An economic time series can often be viewed as a noisy proxy for an underlying economic variable. Measurement errors will influence the dynamic properties of the observed process and may conceal the persistence of the underlying time series. In this paper we develop instrumental variable (IV)...

Recent work by Engle and Lee (1999) shows that allowing for long-run and short-run components greatly enhances a GARCH model’s ability fit daily equity return dynamics. Using the risk-neutralization in Duan (1995), we assess the option valuation performance of the Engle-Lee model and compare...

In this paper we study the asymptotic behaviour of power and multipower variations of stochastic processes. Processes of the type considered serve in particular, to analyse data of velocity increments of a fluid in a turbulence regime with spot intermittency sigma. The purpose of the present...

We present new evidence on disaggregated profit and loss (P/L) and Value-at-Risk (VaR) forecasts obtained from a large international commercial bank. Our dataset includes the actual daily P/L generated by four separate business lines within the bank. All four business lines are involved in...