In a recent paper, Collin-Dufresne and Goldstein (2002) show that the movements of the yield curve and of interest rate derivatives are mostly uncorrelated, advocating the presence of unspanned volatility. This letter shows that their results can be explained in the framework of a Gaussian HJM...

The aim of this paper is to measure and assess the accuracy of different volatility estimators based on high frequency data in an option pricing context. For this, we use a discrete-time stochastic volatility model based on Auto-Regressive-Gamma (ARG) dynamics for the volatility.First, ARG...

A method is proposed to compute a time-varying correlation matrix between asset prices. The method has a natural geometric interpretation in terms of dynamic principal components analysis. The paper illustrates, via Monte Carlo experiments and data analysis, the potential of the method in...

This study reconsiders the role of jumps for volatility forecasting by showing that jumps have a positive and mostly significant impact on future volatility. This result becomes apparent once volatility is separated into its continuous and discontinuous component using estimators which are not...

We study the impact of volatility on intraday serial correlation, at time scales of less than 20 minutes, exploiting a data set with all transactions on SPX500 futures from 1993 to 2001. We show that, while realized volatility and intraday serial correlation are linked, this relation is driven...