Technical paper/Volatility
The quadratic rough Heston model and the joint S&P 500/Vix smile calibration problem
A combination of rough volatility and price-feedback effect allows for SPX-Vix joint calibration
The joint S&P 500/Vix smile calibration puzzle solved
SPX and Vix derivatives are modelled jointly in an arbitrage-free setting
Volatility forecasting: the role of internet search activity and implied volatility
In this study, the authors search for a benchmark model with available market-based predictors to evaluate the net contribution of internet search activity data in forecasting volatility. The paper conducts in-sample analysis and out-of-sample…
The swap market Bergomi model
The combination of two popular volatility models sharpens the hedging of exotic rate derivatives
Stay ahead of the fixing lag
The price of fund-linked derivatives depends on the fixing lag of the underlying funds
A consistent investment strategy
This paper introduces a consistent performance strategy (CPS), which, if followed, leads to a portfolio having consistently positive returns over time and exhibiting a steady upward trend.
Forecasting value-at-risk
Alvin Stroyny and Tim Wilding build a dynamic risk framework for multi-asset global portfolios
Can shorting leveraged exchange-traded fund pairs be a profitable trade?
In this paper, the authors examine if investors can profit from the underperformance of leveraged exchange-traded funds (ETFs) in long holding periods.
Dynamic volatility management: from conditional volatility to realized volatility
In this paper, the authors present a multiperiod portfolio management strategy that can be used to directly manage the realized volatility over a long time horizon.
The efficiency of the Anderson–Darling test with a limited sample size: an application to backtesting counterparty credit risk internal models
This paper presents a theoretical and empirical evaluation of the Anderson–Darling test when the sample size is limited.
The 2D tree–grid method
In this paper, the authors introduce a novel, explicit, wide-stencil, two-dimensional (2D) tree–grid method for solving stochastic control problems (SCPs) with two space dimensions and one time dimension, or, equivalently, the corresponding Hamilton…
From log-optimal portfolio theory to risk measures: logarithmic expected shortfall
In this paper, the authors propose a modification of expected shortfall that does not treat all losses equally. We do this in order to represent the worries surrounding big drops that are typical of multiperiod investors.
Tail-risk mitigation with managed volatility strategies
This paper examines strategy performance from an investment practitioner perspective. Using long-term data from the Standard & Poor’s 500, the authors show that these strategies offer an improvement in risk-adjusted return compared with a buy-and-hold…
Roughening Heston
El Euch, Rosenbaum, Gatheral combine a rough volatility model with the classical Heston model
Range-based volatility forecasting: an extended conditional autoregressive range model
This paper proposes an extended conditional autoregressive range (EXCARR) model to describe the range-based volatility dynamics of financial assets.
ε-monotone Fourier methods for optimal stochastic control in finance
In this paper, the authors give a preprocessing step for Fourier methods that involves projecting the Green’s function onto the set of linear basis functions.
Second-order risk of alternative risk parity strategies
In this paper, the authors provide theoretical and empirical evidence of the contribution of second-order risk to realized volatility for alternative risk parity strategies.
An adaptive Filon quadrature for stochastic volatility models
In this paper, the author describes a simple adaptive Filon method that performs better and more accurately than various popular alternatives for pricing options under the Heston model.
Reducing margin procyclicality at central counterparties
This paper studies the effect of less procyclical margin models on cleared volumes and risk taking in a stylized CCP.
Evaluating the credit exposure of interest rate derivatives under the real-world measure
This paper examines the credit exposure evaluation properties of interest rate derivatives to manage counterparty credit risk, working with the real-world probability.
Covering the world: global evidence on covered calls
Typical covered call strategies may be decomposed, using a risk and performance attribution methodology, into three components: equity exposure, short volatility exposure and equity timing. This paper applies that attribution methodology to covered calls…
Shrunk volatility value-at-risk: an application on US balanced portfolios
In this paper, the authors adopt a new method of predicting VaR, to estimate balanced portfolios’ VaR.
The predictability implied by consumption-based asset-pricing models: a review of the theory and empirical evidence
This paper examines whether two well-known models, Campbell and Cochrane’s habit model and Bansal and Yaron’s long-run risks model, can produce significant return predictability.
Genetic algorithm-based portfolio optimization with higher moments in global stock markets
This paper investigates the distributional characteristics of stock market returns and analyzes the significance of higher moments.