benchmarked risk minimization avoids these restrictive assumptions. It employs the real world probability measure as pricing …

Equity basket correlation is an important risk factor. It characterizes the strength of linear dependence between … propose several hedging schemes based on implied correlation (IC) forecasts. Modeling IC is a challenging task both in terms … of computational burden and estimation error. First the number of correlation coefficients to be estimated would grow …

Implied correlation and variance risk premium stand out in predicting market returns. However, while the predictive … ability of implied correlation lasts for up to a year, the variance risk premium predicts market returns only for one quarter … ahead. Contrary to the accepted view, implied correlation predicts the market return not through a diversification risk …

method to the vanilla and the Quanto market. As Quanto products offer significant exposure to the correlation between … exchange rates and asset prices, they allow access to a market implied measure of this correlation. By means of a joint …

This paper adopts a versatile multivariate conditional correlation model to estimate daily seasonality in the returns …