This paper introduces a more general modeling world than available under the classical no-arbitrage paradigm in finance. New research questions and interesting related econometric studies emerge naturally. To explain in this paper the new approach and illustrate first important consequences, we...

We propose a framework for modeling in a consistent manner the VIX index and the VXX, an exchange-traded note written on the VIX. Our study enables to link the properties of VXX to those of the VIX in a tractable way. In particular, we quantify the systematic loss observed empirically for VXX...

Explicitly taking into account the risk incurred when borrowing at a shorter tenor versus lending at a longer tenor ("roll-over risk"), we construct a stochastic model framework for the term structure of interest rates in which a frequency basis (i.e. a spread applied to one leg of a swap to...

In this paper we introduce a new criterion in order to measure the variance and covariance risks in financial markets. Unlike past literature, we quantify the (co)variance risk by comparing the spread between the initial wealths required to obtain the same final utility in an incomplete and...

In this paper, we present and discuss the estimation of the Wishart Affine Stochastic Correlation (WASC) model introduced in Da Fonseca et al. (2006) under the historical measure. We review the main estimation possibilities for this continuous time process and provide elements to show that the...

We analyze the VIX futures market with a focus on the exchange-traded noteswritten on such contracts, in particular we investigate the VXX notes tracking theshort-end part of the futures term structure. Inspired by recent developments incommodity smile modelling, we present a multi-factor...

We price for different affine stochastic volatility models some derivatives that recently appeared in the market. These products are characterised by payoffs depending on both stock and its volatility. Using a Fourier-analysis approach, we recover in a much simpler way some results already...

Target volatility options (TVO) are a new class of derivatives whose payoff depends on some measure of volatility. These options allow investors to take a joint exposure to the evolution of the underlying asset, as well as to its realized volatility. For instance, a target volatility call can be...

This article presents lower and upper bounds on the prices of basket options for a general class of continuous-time financial models. The techniques we propose are applicable whenever the joint characteristic function of the vector of log-returns is known in closed-form. Moreover, the basket...

We provide analytic pricing formulas for Fixed and Floating Range Accrual Notes within the multi-factor Wishart affine framework which extends significantly the standard affine model. Using estimates for three short rate models, two of which are based on the Wishart process whilst the third one...