Technical paper/Volatility
‘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.
Cross-dependent volatility
Julien Guyon introduces cross-dependent volatility models and calibrate them to market smiles
Performance versus turnover: a story by 4000 alphas
This paper analyzes empirical data for 4000 real-life trading portfolios with holding periods of about 0.7-19 trading days.
Non-parametric local volatility formula for interest rate swaptions
Gatarek, Jabłecki and Qu introduce a Dupire-like formula for swaptions
B-spline techniques for volatility modeling
In this paper the use of B-splines is advocated for volatility modeling within the calibration of stochastic local volatility (SLV) models and for the parameterization of an arbitrage-free implied volatility surface calibrated to sparse option data.
Downside risk measure performance in the presence of breaks in volatility
This paper proposes a loss function-based framework for the comparative measurement of the sensitivity of quantile downside risk measures to breaks in volatility or distribution.
Wrong-way risk done right
Jacky Lee and Luca Capriotti present an arbitrage-free valuation method for counterparty exposure of credit derivates portfolios.
Commodity leveraged ETFs: Tracking errors, volatility decay and trading strategies
Tracking performance of ETFs is examined, with a focus on volatility decay
Path-dependent volatility
Julien Guyon on path-dependent volatility models
Cutting edge: Incorporating forex volatility into commodity spread option pricing
Spread option pricing: importance of forex risk factors illustrated
Cutting edge: Modelling dependence of price spikes in Australian electricity markets
The deregulation of Australian electricity markets has brought several challenges, including the possibility of price spikes, which expose market participants to significant risks. As Adebayo Aderounmu and Rodney Wolff outline, these spikes are hard to…