Technical paper/Volatility
Statistics of VIX futures and their applications to trading volatility exchange-traded products
In this paper, the authors study the dynamics of Chicago Board Options Exchange volatility index (VIX) futures and exchange-traded notes (ETNs)/exchange-traded funds (ETFs).
The present of futures
Fabio Mercurio introduces a new multi-curve model for pricing futures convexity adjustments
The impact of unconventional monetary policy shocks on the crude oil futures market
This paper examines how West Texas Intermediate (WTI) crude oil price returns and volatilities respond to changes in US monetary policy.
Foreign exchange correlation swap: problem solver or troublemaker?
A correlation structure is an important element in pricing products such as correlation swaps
Local volatility from American options
De Marco and Henry-Labordère provide an approximation of American options in terms of the local volatility function
Calibrating Heston for credit risk
Marco de Innocentis and Sergei Levendorskiĭ describe a faster and more accurate method for market-implied calibration of the Heston model
Haircutting non-cash collateral
Wujiang Lou develops a parametric haircut model to conduct sensitivity tests and capture market liquidity risk
An operational risk-based regime-switching model for stock prices
This paper proposes a new risk-based regime-switching model for stock prices to examine the impact of operational risk events on stock prices.
Comparing multivariate volatility forecasts by direct and indirect approaches
This paper investigates direct and indirect volatility evaluations in the multivariate framework by means of a Monte Carlo simulation
Local-stochastic volatility: models and non-models
Lorenzo Bergomi exposes a condition important to the use of LSV models in trading
Initial margin model sensitivity analysis and volatility estimation
This paper presents a new approach to parameter selection based on the statistical properties of the worst loss over a margin period of risk estimated by the margin model under scrutiny.
Trading lightly: cross-impact and optimal portfolio execution
A liquidity model for basket of correlated securities is presented
Does higher-frequency data always help to predict longer-horizon volatility?
This paper shows that realized conditional autocorrelation in return residuals is a strong predictor of the relative performance of different frequency models of volatility.
Are the GIPS sovereign debt markets efficient during a crisis?
This paper aims to analyze the efficiency of the Greek, Italian, Portuguese and Spanish (ie, GIPS) sovereign debt markets during crises: in essence, the recent global financial and sovereign debt crises
Time-varying beta and the global financial crisis: evidence from Chinese and Indian firms
This paper empirically investigates the effects of the global financial crisis of 2008 on the time-varying beta of twenty firms from China and India.
A pairs trading strategy based on switching-regime volatility for commodity futures
A pairs trading strategy can give a larger Sharpe ratio with respect to classical methods
How risk managers should fix tracking error volatility and value-at-risk constraints in asset management
In this paper, the author determines an optimal value for a set of limits composed of the lower limit on TEV, the upper limit on TEV and the upper limit on VaR.
Scaling by the square-root-of-time rule: an empirical investigation using five market indexes
This paper analyzes five composite stock indexes to determine the different behaviors of scaling across markets.
‘Hot-start’ initialisation of the Heston model
Serguei Mechkov initialises Heston model’s parameters using probability distributions
Commodity volatility, skew and inverse leverage effect
Krzysztof Wolyniec on leverage effects and volatility in commodity markets
Interest rate models enhanced with local volatility
Lingling Cao and Pierre Henry-Labordère implement Dupire's local volatility in interest rate models
The effect of market conditions on forward-looking portfolio performance
The authors of this paper apply a forward-looking approach to the minimum variance portfolio optimization problem for a selection of 100 stocks.
The forward smile in local–stochastic volatility models
The Authors introduce a closed-form approximation for the forward implied volatilities.
Wavelet decomposition and applied portfolio management
In order to separate short-term noise from long-term trends, this paper decomposes financial return series into their time and frequency domains.