We apply a quadratic hedging scheme developed by Föllmer, Schweizer, and Sondermann to European contingent products whose underlying asset is modeled using a GARCH process and show that local risk-minimizing strategies with respect to the physical measure do exist, even though an associated...

The Great Recession endured by the main industrialized countries during the period 2008–2009, in the wake of the financial and banking crisis, has pointed out the major role of the financial sector on macroeconomic fluctuations. In this respect, many researchers have started to reconsider the...

In this paper, we derive fully explicit closed-form expressions for the fair strike prices of discrete-time variance swaps under general affine GARCH type models that have been risk-neutralized with a family of variance dependent pricing kernels. The methodology relies on solving differential...

This paper provides implementation details and application examples of the asymptotic error evaluation formulas introduced in the reference [GO14a] concerning three different approaches to the forecasting of linear temporal aggregates using estimated linear processes. The first two techniques...

A method capable of estimating richly parametrized versions of the dynamic conditional correlation (DCC) model that go beyond the standard scalar case is presented. The algorithm is based on the maximization of a Gaussian quasi-likelihood using a Bregman-proximal trust-region method that handles...