This article presents a Markov chain framework to characterize the behavior of the CBOE Volatility Index (VIX index). Two possible regimes are considered: high volatility and low volatility. The specification accounts for deviations from normality and the existence of persistence in the...

The ad hoc Black-Scholes (AHBS) model is one of the most widely used option valuation models among practitioners models. The main contribution of this study is methodological. We have two main results: (1) we make the empirical observation that typically the call and put sneers are discontinuous...

In this paper, I show that the variance of Fama-French factors, the variance of the momentum factor, as well as the correlation between these factors, predict an important fraction of the time-series variation in post-1990 aggregate stock market returns. This predictability is particularly...

We derive valuation formulas for caps and floors on backward-looking term rates in the Black-1976, Bachelier and Hull-White-1-Factor models explicitly regarding valuation in the fixing period, extending and detailing results of [Lyashenko & Mercurio 2019, Henrard 2019, Turfus 2020]. These...

This paper finds substantial risk diversification potential between certain commodity groups and stocks by exploring the dependence between their patterns of regime switching. None of the commodity groups share a common volatility regime with stocks, nor are the regime switching patterns of...

Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage effects relative to returns. At the same time, the volatility risk premium, defined by the difference between the risk-neutral and objective expectations of the...

The purpose of the paper is twofold. First, it aims at identifying when UK and European (France, Germany, Italy and Spain) Credit Default Swaps(CDSs) exhibit explosivity with respect to their past behaviors. Second, it seeks to quantify the dynamics of CDS volatility spillover effects...

This paper presents a new formalism to price European options in all asset classes that fits the market data remarkably well. We use a model-independent representation of European Option prices as path integrals over all of the underlying asset price from inception to maturity. The no arbitrage...

There has been substantial research effort aimed to forecast futures price return volatilities of financial and commodity assets. Some part of this research focuses on the performance of time-series models (in particular ARCH models) versus option implied volatility models. A significant part of...

Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage effects relative to returns. At the same time, the volatility risk premium, defined by the difference between the risk-neutral and objective expectations of the...