Bermudan cancelable features. We consider a three-factor pricing model with FX volatility skew which results in a time …

Volatility trading is in vogue. Launched in January 2009, exchange-traded products (ETPs) linked to the CBOE Market … Volatility Index (VIX) have enamored no small number of traders judging by the billions of dollars invested in these new products …

occasional large epiphanies concerning the management of volatility.This article outlines how philosophers, physicists, and … financial modelers have quantified the notion of derivatives, diffusion, risk, volatility, the riskless rate, diversification …, hedging, replication, and the principle of no riskless arbitrage. Volatility, once a qualitative term, has become an asset …

recently. - Horizontal dependence of volatility: Volatility is not constant, it is mean-reverting and it tends to cluster … (meaning that high volatility is likely to be followed by high volatility periods, and vice-versa). Moreover, volatility … theory - stated differently, the returns distribution has fat tails. Moreover, shocks have a strong impact on volatility and …

We propose a model of volatility tail behavior, in which the pricing measure dominates the physical measure in both … tails of the volatility distribution and, hence, the derived pricing kernel exhibits an increasing and decreasing region in … the volatility dimension. The model features investors who have heterogeneity in beliefs about volatility outcomes, and …

incorporating stochastic interest rates and stochastic volatility. Several hedging schemes are considered including delta, gamma … interest rate models, an improvement that becomes more pronounced over periods with high interest rate volatility, such as … volatility and the hedge is subject to high basis risk, adding interest rate hedge to delta hedge provides an improvement, while …