Ayush Jha, Abootaleb Shirvani, Svetlozar T. Rachev, Frank J. Fabozzi
arXiv 5 Nov 2024 · Econometrics · publishedJournal of risk and financial management (2024) · 2 citations (OpenAlex)
arXiv:2411.02804 · PDF · DOI · OpenAlex · Extracted main text
We introduce a new identification strategy for uncertainty shocks to explain macroeconomic volatility in financial markets. The Chicago Board Options Exchange Volatility Index (VIX) measures market expectations of future volatility, but traditional methods based on second-moment shocks and time-varying volatility of the VIX often fail to capture the non-Gaussian, heavy-tailed nature of asset returns. To address this, we construct a revised VIX by fitting a double-subordinated Normal Inverse Gaussian Levy process to S&P 500 option prices, providing a more comprehensive measure of volatility that reflects the extreme movements and heavy tails observed in financial data. Using an axiomatic approach, we introduce a general family of risk-reward ratios, computed with our revised VIX and fitted over a fractional time series to more accurately identify uncertainty shocks in financial markets.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Shirvani, A., Mittnik, S., Lindquist, W. B., and Rachev, S. T (2024) Bitcoin volatility and intrinsic time using double-subordinated lévy processes self | 1.000 | 6 | 4 | 100% |
| 2 | Shirvani, A., Rachev, S., and Fabozzi, F (2021) Multiple subordinated modeling of asset returns: Implications for option pricing self | 0.737 | 3 | 2 | 100% |
| 3 | Kozeniauskas, N., Orlik, A., and Veldkamp, L (2018) What are uncertainty shocks? | 0.644 | 2 | 2 | 100% |
| 4 | Bloom, N (2014) Fluctuations in uncertainty | 0.644 | 2 | 2 | 100% |
| 5 | Kelly, B. and Jiang, H (2014) Tail risk and asset prices | 0.644 | 2 | 2 | 100% |
| 6 | Orlik, A. and Veldkamp, L (2014) Understanding uncertainty shocks and the role of black swans | 0.644 | 2 | 2 | 100% |
| 7 | Cont, R (2000) Empirical properties of asset returns: Stylized facts and statistical issues | 0.511 | 2 | 1 | 100% |
| 8 | Carr, P. P. and Madan, D (2001) Option valuation using the Fast Fourier Transform | 0.511 | 2 | 1 | 100% |
| 9 | Cheridito, P. and Kromer, E (2013) Reward–risk ratios | 0.511 | 2 | 1 | 100% |
| 10 | Shirvani, A., Stoyanov, S. V., Rachev, S. T., and Fabozzi, F. J (2020) A new set of financial instruments self | 0.511 | 2 | 1 | 100% |
Showing the top 10 of 34 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Advancing Portfolio Optimization: Adaptive Minimum-Variance Portfolios and Minimum Risk Rate Frameworks | 0.405 | 1 | 1 |