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Volatility-of-Volatility Risk [PDF]
Journal of Financial and Quantitative Analysis, 2018 We show that market volatility of volatility is a significant risk factor that affects index and volatility index option returns, beyond volatility itself. The volatility and volatility of volatility indices, identified model-free as the VIX and VVIX, respectively, are only weakly related to each other.
Darien Huang +3 more
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How Does the Volatility of Volatility Depend on Volatility? [PDF]
Risks, 2020 We investigate the state dependence of the variance of the instantaneous variance of the S&P 500 index empirically. Time-series analysis of realized variance over a 20-year period shows strong evidence of an elasticity of variance of the variance parameter close to that of a log-normal model, albeit with an empirical autocorrelation function that ...
Sigurd Emil Rømer, Rolf Poulsen
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On the Volatility of Volatility [PDF]
SSRN Electronic Journal, 2006 The Chicago Board Options Exchange (CBOE) Volatility Index, VIX, is calculated based on prices of out-of-the-money put and call options on the S&P 500 index (SPX). Sometimes called the "investor fear gauge," the VIX is a measure of the implied volatility of the SPX, and is observed to be correlated with the 30-day realized volatility of the SPX ...
Stephen D. H. Hsu, Brian M. Murray
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The Volatility of Realized Volatility [PDF]
Econometric Reviews, 2008 In recent years, with the availability of high-frequency financial market data modeling realized volatility has become a new and innovative research direction. The construction of “observable” or realized volatility series from intra-day transaction data and the use of standard time-series techniques has lead to promising strategies for modeling and ...
CORSI, Fulvio +3 more
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Estimating Stochastic Volatility under the Assumption of Stochastic Volatility of Volatility [PDF]
Risks, 2020 We propose novel nonparametric estimators for stochastic volatility and the volatility of volatility. In doing so, we relax the assumption of a constant volatility of volatility and therefore, we allow the volatility of volatility to vary over time. Our methods are exceedingly simple and far simpler than the existing ones. Using intraday prices for the
Moawia Alghalith +2 more
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From volatility smiles to the volatility of volatility [PDF]
Decisions in Economics and Finance, 2019 The authors review models of the option surface and reduced-form models for stochastic volatility in continuous time, under the risk-neutral measure. They introduce ``forward volatilities'' (in analogy with forward interest rates in the term structure theory), and prove that such objects are conditional expected values, under the risk-neutral measure ...
Bernard Dumas, Elisa Luciano
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Volatility of volatility of financial markets [PDF]
Mathematical and Computer Modelling, 1998 zbMATH Open Web Interface contents unavailable due to conflicting licenses.
L. Ingber, J.K. Wilson
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SSRN Electronic Journal, 2014 Estimating volatility from recent high frequency data, we revisit the question of the smoothness of the volatility process. Our main result is that log-volatility behaves essentially as a fractional Brownian motion with Hurst exponent H of order 0.1, at any reasonable time scale.
Gatheral, Jim +2 more
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Volatility Options in Rough Volatility Models [PDF]
SSRN Electronic Journal, 2018 We discuss the pricing and hedging of volatility options in some rough volatility models. First, we develop efficient Monte Carlo methods and asymptotic approximations for computing option prices and hedge ratios in models where log-volatility follows a Gaussian Volterra process.
Blanka Horvath +2 more
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Volatility Forecasting for Low-Volatility Investing
SSRN Electronic Journal, 2022 Low-volatility investing often involves sorting and selecting stocks based on retrospective risk measures, for example, the historical standard deviation of returns. In this paper, we use the volatility forecasts from a wide spectrum of volatility models to sort and select stocks and estimate portfolio weights.
Christian Conrad +2 more
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