Question 1 (how to set asset level risk budgets as well as portfolio level target volatility) is discussed in Modern Portfolio Optimization by Bernd Scherer and Douglas Martin in section 3.1.1 on ris... Read More

Using months of proprietary data that labels participants by their participant ID, it has been found that during periods of significant volatility, the composition of HFT participants in the book rem... Read More

You'll find here that in terms of European option prices , the absence of calendar arbitrage writes $$ \frac{\tilde{C}(k\, F(0,t2),t2)}{F(0,t2)} \geq \frac{\tilde{C}(k \, F(0,t1),t1)}{F(0,t1)}, \fora... Read More

In any finite sample, it is always possible for the Zhou estimator to return a negative number, even though we know the unobservable parameter being estimated is non-negative. This is a well known is... Read More

Yes it is a better way. Just take a look to figure 3, from Buss and Vilkov (2012, RFS):... Read More

Let's skip calling it volatility and variance. Let us deal with variance and standard deviation. For normally distributed variables, it is very important to distinguish between the true variance and... Read More

In the past few days I tried pricing Put options using other methods other than the Black's approximation. So far i came to the conclusion that the best methods are those presented in Haug "The compl... Read More

I would argue that indeed none of the so-called stylized facts you mentioned can be explained by classical economic theory. That there was a gross delta between the predictions of classical economic... Read More

The choice of hedging strategy cannot affect the expected p/l, because hedging just consists of doing at-market purchases or sales of the underlying, each of which have zero expected value at the tim... Read More

You discuss the behavior of stock prices after an earnings announcement. There is a significant amount of academic research on this topic (called post-earnings-announcement drift). It basically finds... Read More