We propose a new modeling approach to option valuation, in which the volatility and skewness of returns are functions of three distinct, but dependent, stochastic components: Two components modeling short and long run volatility risk and a third component capturing shocks to return skewness that are unspanned by shocks to volatility. The model state dynamics follows a matrix jump diffusion, pro...

We consider Taylor’s stochastic volatility model when the innovations of the hidden log-volatility process have a Laplace distribution (`1 exponential density), rather than the standard Gaussian distribution (`2) usually employed. Using a distribution with heavier tails allows better modeling of the abrupt changes of regime observed in financial time series. We derive here the moments and autoc...

Purpose: In this paper, the volatility of Croatian stock market index CROBEX is investigated using GARCH(1,1) model. Methodology: The novelty provided by paper estimation model three conditional error distributions (normal (Gaussian) distribution, Student’s-distribution with fixed degrees freedom and generalized distribution (GED) parameters). Results: findings obtained in research are line pre...

‎The main purpose of this paper is to analyze the exchange rate volatility in Iran in the time period between 2011/11/27 and 2017/02/25 on a daily basis. As a tradable asset and as an important and effective economic  variable, exchange rate plays a decisive role in the economy of a country. In a successful economic management, the modeling and prediction of the exchange rate volatility is esse...

Market microstructure theories suggest that the durations between transactions carry information about volatility. This paper puts forward a model featuring stochastic volatility, stochastic conditional duration, and jumps to analyze high frequency returns and durations. Durations affect price jumps in two ways: as exogenous sampling intervals, and through the interaction with volatility. We ad...