Stock prices often respond drastically to the information firms release to the market on quarterly earnings announcement dates (EADs) (see Figure 1). For instance, almost 20% of Google’s total annual volatility is accumulated on EADs. Estimating the stock market risk ex ante (before the news release) is difficult as each of these announcements is unique. … [Read more…]
In this paper we introduce the displaced historical simulation model which is designed to handle negative and close-to-zero risk factors. This is an issue of recent and major interest to the financial sector, both from a regulatory and financial institutions perspective, especially in light of observed negative values for major bond yield and interest rate … [Read more…]
It exist strong consensus in the academic literature that if we want to describe the random behaviour of equity products, as e.g. the S&P 500 index, we need to understand two main structures: stochastic volatility and jumps. Our paper compares the performance of a large number of state of the art continuous-time models. The model specifications … [Read more…]