How to Measure the Uncertainty of Stock Prices around Earnings Announcement Days?

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…]

Risk Management in Times of Negative Interest Rates

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…]

Affine, or Non-affine, that is the question!

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…]