This book is a collection of readings on stochastic volatility for stocks, stock indexes, foreign currencies, interest rates and commodities. It is a collection of readings on new techniques - that is, techniques beyond the standard Black-Scholes framework. And its focus is on pricing derivatives and managing financial portfolios.
The readings represent the knowledge and experiences of a diverse set of outstanding scholars. Many different topics are discussed, from many different perspectives. The hope, in bringing these readings together, is to generate a single source of knowledge that can be used to help resolve any question in the area of stochastic volatility.
PART I. Making Garch Work: Tests, Refinements and Applications
1. A Survey of Garch Models: Properties, Estimation and Testing, by Anil Bera and Matthew Higgins
2. ARCH Modelling in Finance, by Tim Bollerslev, Ray Chou and Kenneth Kroner
3. Modelling Stochastic Volatility: A Review and Comparative Study, by Stephen Taylor
4. Multivariate Garch Modelling of Asset Returns
by Kenneth Kroner and Victor Ng
5. Index-Option Pricing with Stochastic Volatility and the Value of Accurate Variance Forecasts, by Robert Engle, Alex Kane and Jaesun Noh
6. Markov Switching in Garch Processes and Mean-Reverting Stock market Volatility, by Michael Dueker
PART II. Exploring Volatility Patterns Over Time
7. Information Noise and Stock return Volatility: Evidence from Germany, by Geoffrey Booth and Mustafa Chowdhury
8. The Impact of Firm Specific News on Implied Volatilities, by Monique Donders and Ton Vorst
9. Calendar-Adjusted Volatilities, by Galen Burghardt and Gerald Hanweck
10. Intraday Volatility in the Stock Index and Stock Index Futures Market, by Kalok Chan, K.C. Chan and Andrew Karolyi
11. The Term Structure of Volatility Implied by Foreign Exchange Options, by Xinzhong Xu and Stephen Taylor
PART III. Forecasting Volatilities with Implied Volatilities
12. Forecasting Futures Market Volatility, by Theodore Day and Craig Lewis
13. The Informational Content of Implied Volatility, by Linda Canina and Stephen Figlewski
14. Forecasting Stock-Return Variance: Toward an Understanding of Stochastic Implied Volatilities, by Christopher Lamoreux and William Lastrapes
15. Inferring Future Volatility from the Information in Implied Volatility in Eurodollar Options: A New Approach
PART IV. Interrelated International Markets: Price and Volatility Spillovers
16. Relationship between Volatility and Expected Returns across International Stock Markets, by Panayiotis Theodossiou and Unro Lee
17. Volatility Reversion and Correlation Structure of Returns in Major International Stock Markets, by Panayiotis Theodossiou, Emel Kahya, Gregory Koutmos and Andreas Christofi
18. International Linkages in the Nikkei Stock Index Futures Markets, by Geoffrey Booth, Tae-Hwy Lee and Yiuman Tse
19. Price and Volatility Spillovers in Scandinavian Stock Markets, by Geoffrey Booth, Teppo Martikainen and Yiuman Tse
20. Common Volatility and Volatility Spillovers between US and Eurodollar Interest Rates: Evidence from the Futures Markets, by Yiuman Tse and Geoffrey Booth
PART V. Stochastic Volatility Models: The Next Generation?
21. Option Pricing with random Volatilities in Complete Markets, by Larry Eisenberg and Robert Jarrow
22. Stock Price Distributions with Stochastic Volatility: An Analytic Approach, by Elias Stein and Jeremy Stein
23. A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options, by Steven Heston
24. The Garch Option Pricing Model, by Jin-Chuan Duan
PART VI. Smiles, Skews and Stochastic Volatilities
25. Implied Trinomial Trees of the Volatility Smile, by Emanuel Derman, Iraj Kani and Neil Chriss
26. Implied Volatility Skews and Stock index Skewness and Kurtosis implied by S&P 500 Index Option Prices
27. Garch Gamma, by Robert Engle and Joshua Rosenberg
28. Derivatives on Market Volatility: Hedging Tools Long Overdue, by Robert Whaley
PART VII. A Practitioner's Perspective: What's Ahead?
29. Toward a Theory of Volatility Trading, by Peter Carr and Dilip Madan
30. Pricing and Hedging with Smiles, by Bruno Dupire
31. Stochastic Implied Trees: Arbitrage Pricing with Stochastic Term and Strike Structure of Volatility, by Emanuel Derman and Iraj Kani
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