A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
A new model adds stochastic spot/volatility correlation to Heston model for better exotic pricing.
Research forecasts electricity spot prices using stochastic volatility models.
TGARCH model shows CSI-300 futures reduce spot price volatility.
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local volatility/stochastic volatility mixture model, where the mixture parameter tunes that covariance. T…
This paper introduces the class of volatility modulated Lévy-driven Volterra (VMLV) processes and their important subclass of Lévy semistationary (LSS) processes as a new framework for modelling energy spot prices. The main modelling idea consists of four principles: First, deseasonalised spot prices can be modelled di…
Study Fourier estimator for spot volatility with unbounded coefficients and jumps.
Estimates volatility of volatility and leverage effect using high-frequency options data.
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure, decorrelation of moves in different points on the forward curve, and implied volatil…
It is well known that in models with time-homogeneous local volatility functions and constant interest and dividend rates, the European Put prices are transformed into European Call prices by the simultaneous exchanges of the interest and dividend rates and of the strike and spot price of the underlying. This paper inv…
For a commodity spot price dynamics given by an Ornstein-Uhlenbeck process with Barndorff-Nielsen and Shephard stochastic volatility, we price forwards using a class of pricing measures that simultaneously allow for change of level and speed in the mean reversion of both the price and the volatility. The risk premium i…
It has been recently shown that spot volatilities can be very well modeled by rough stochastic volatility type dynamics. In such models, the log-volatility follows a fractional Brownian motion with Hurst parameter smaller than 1/2. This result has been established using high frequency volatility estimations from histor…
We investigate the joint dynamics of spot and implied volatility from an empirical perspective. We focus on the equity market with the SPX Index our underlying of choice. Using only observable quantities, we extract the instantaneous variance curves implied by the market and study their daily variations jointly with sp…
Study compares volatility models for Bitcoin, finds GARCH and EGARCH outperform.
New framework improves option pricing models by addressing volatility dynamics.
The paper proves the consistency and efficiency of a volatility estimator in noisy data.
Paper develops new spot regression estimators using candlesticks for asset pricing.
Empirical study finds variance swap rate is affine in spot variance for S&P500 data.
A third-order approximation for close-to-the-money European option prices under an infinite-variation CGMY Lévy model is derived, and is then extended to a model with an additional independent Brownian component. The asymptotic regime considered, in which the strike is made to converge to the spot stock price as the ma…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed process can match exactly the risk-neutral distributions implied by both spot va…
We discuss stochastic modeling of volatility persistence and anti-correlations in electricity spot prices, and for this purpose we present two mean-reverting versions of the multifractal random walk (MRW). In the first model the anti-correlations are modeled in the same way as in an Ornstein-Uhlenbeck process, i.e. via…
In commodity markets the convergence of futures towards spot prices, at the expiration of the contract, is usually justified by no-arbitrage arguments. In this article, we propose an alternative approach that relies on the expected profit maximization problem of an agent, producing and storing a commodity while trading…
The paper explains stock predictability by integrating rational finance without behavioral finance assumptions.
Study shows different price correlations in European electricity markets.
We consider a class of stochastic path-dependent volatility models where the stochastic volatility, whose square follows the Cox-Ingersoll-Ross model, is multiplied by a (leverage) function of the spot price, its running maximum, and time. We propose a Monte Carlo simulation scheme which combines a log-Euler scheme for…
GG distribution improves option pricing for negatively skewed spot price distributions.
In this paper, we study the price of Variable Annuity Guarantees, especially of Guaranteed Annuity Options (GAO) and Guaranteed Minimum Income Benefit (GMIB), and this in the settings of a derivative pricing model where the underlying spot (the fund) is locally governed by a geometric Brownian motion with local volatil…
The paper examines variable annuities pricing and risk management using the Black-Scholes model and identifies key risk drivers.
The paper models Gasoil options using Brent benchmarks, improving volatility estimation.
SpotV2Net forecasts intraday spot volatilities using graph attention networks.
The electricity market is a very peculiar market due to the large variety of phenomena that can affect the spot price. However, this market still shows many typical features of other speculative (commodity) markets like, for instance, data clustering and mean reversion. We apply the diffusion entropy analysis (DEA) to …
We derive the price of a spread option based on two assets which follow a bivariate volatility modulated Volterra process dynamics. Such a price dynamics is particularly relevant in energy markets, modelling for example the spot price of power and gas. Volatility modulated Volterra processes are in general not semimart…
This paper contains a phenomenological description of the whole U.S. forward rate curve (FRC), based on an data in the period 1990-1996. We find that the average FRC (measured from the spot rate) grows as the square-root of the maturity, with a prefactor which is comparable to the spot rate volatility. This suggests th…
New method for spot volatility estimation with reduced microstructure noise.
Currency volatility shocks predict lower excess returns, and buying weak transmitters outperforms selling strong ones.
The study finds that specific distributions can be used for risk-neutral valuation in Heston's SV model.
Asymptotic analysis of short-maturity options on realized variance in local-stochastic volatility models.
By Gyongy's theorem, a local and stochastic volatility (LSV) model is calibrated to the market prices of all European call options with positive maturities and strikes if its local volatility function is equal to the ratio of the Dupire local volatility function over the root conditional mean square of the stochastic v…
The paper analyzes gold, oil, and bitcoin futures volatility and basis.
Model simulates Perpetual Futures market with agent behavior.
Study on estimating volatility of volatility using Fourier methods and provides insights into volatility dynamics.
In Europe, Germany is taking the lead in the switch from the conventional to renewable energy. This poses new challenges as wind and solar energy are fundamentally intermittent, weather-dependent and less predictable. It is therefore of considerable interest to investigate the evolution of price volatility in this post…
Hybrid models forecast EPEC energy spot prices.
In this article, we consider the small-time asymptotics of options on a \emph{Leveraged Exchange-Traded Fund} (LETF) when the underlying Exchange Traded Fund (ETF) exhibits both local volatility and jumps of either finite or infinite activity. Our main results are closed-form expressions for the leading order terms of …
We tackle the calibration of the so-called Stochastic-Local Volatility (SLV) model. This is the class of financial models that combines the local and stochastic volatility features and has been subject of the attention by many researchers recently. More precisely, given a local volatility surface and a choice of stocha…
In this paper we introduce a flexible HJM-type framework that allows for consistent modelling of intraday, spot, futures, and option prices. This framework is based on stochastic processes with economic interpretations and consistent with the initial term structure given in the form of a price forward curve. Furthermor…
FINN learns option pricing and hedging using financial theory.
New model captures asymmetric rough volatility with Zumbach effect.
Derives pricing formulas for perpetual futures contracts.