VIX option pricing and CBOE VIX Term Structure: A new methodologyfor volatility derivatives valuation

This study integrates CBOE VIX Term Structure and VIX futures to simplify VIX option pricing in multifactormodels. Exponential and hump volatility functions with one- to three-factor models of the VIX evolutionare used to examine their pricing for VIX options across strikes and maturities. The results showthat using exponential volatility functions presents an effective choice as pricing models for VIX calls,whereas hump volatility functions provide efficient out-of-sample valuation for most VIX puts, in particularwith deep in-the-money and deep out-of-the-money. Pricing errors for calls can be further reducedwith a two-factor model

Is Volatility Priced?

The asymmetric nature of the volatility response to return shocks could simply reflect the existence of time-varying risk premiums. This study proposes a stochastic volatility process allowing for time-varying correlation with underlying returns, in which the market price of volatility risk is naturally taken into account. Historical S&P 500 returns over the period January 1969¡ªDecember 2004 are investigated under Kalman filtration. We successfully identify and isolate the volatility risk premium in the pricing process, and thereafter demonstrate the relative contributions of price premiums and volatility premiums to underlying returns. The market price of volatility risk is found to be positive and increases with investment horizons. The existence of volatility risk premium may help solve the pricing puzzle in CAPM that empirically underprices low-beta assets but overprices high-beta assets, which reasons the importance of this study.Volatility risk premium, Stochastic volatility, Kalman filter, Quasimaximum likelihood

Consistent modeling of S&P 500 and VIX derivatives

This study introduces a model that identifies relationships between stylized features on S&P 500, VIX and derivatives on VIX. The paper considers a specification with discontinuous correlated jumps in stock prices and stock price volatility with state-dependent arrival intensity, and examines how these factors impact VIX option pricing and hedging. The paper finds strong evidence for jumps in volatility and jumps in returns implicit in VIX option data.VIX option Stochastic volatility Jumps State-dependent jump frequency Delta hedging

Empirical performance of multifactor term structure models for pricing and hedging Eurodollar futures options

This article compares two one-factor, two two-factor, two three-factor models in the HJM class and Black's [Black, F. (1976). The pricing of commodity contracts. Journal of Financial Economics, 3, 167-179.] implied volatility function in terms of their pricing and hedging performance for Eurodollar futures options across strikes and maturities from 1 Jan 2000 to 31 Dec 2002. We find that three-factor models perform the best for 1-day and 1-week prediction, as well as for 5-day and 20-day hedging. The moneyness bias and the maturity bias appear for all models, but the three-factor models produce lower bias. Three-factor models also outperform other models in hedging, in particular for away-from-the-money and long-dated options. Making Black's volatility a square root or exponential function performs similar to one-factor HJM models in pricing, but not in hedging. Correctly specified and calibrated multifactor models are thus important and cannot be replaced by one-factor models in pricing or hedging interest rate contingent claims.Multifactor HJM model Volatility function Eurodollar futures option

Urinary MicroRNA Sensing Using Electrochemical Biosensor to Evaluate Colorectal Cancer Progression

Research in cancer diagnostics has recently established its footing and significance in the biosensor sphere, emphasizing the idea of a unique probe design used as a sensor and actuator, to identify the presence of protein, DNA, RNA, or miRNA. The fluorescein isothiocyanate (FITC) probe and biotinylated probe are designed for a two-pronged approach to the detection of the urinary miR-21 and miR-141, both of which have demonstrated significance in the development and progression of colorectal cancer, a leading cause of mortality and morbidity. The remainder of the apparatus is composed of a modified screen-printed carbon electrode (SPCE), to which the probes adhere, that transduces signals via the redox reaction between H2O2 and HRP, measured with chronoamperometry and cyclic voltammetry. The precise nature of our ultra-non-invasive biosensor makes for a highly sensitive and practical cancer detector, concluded by the significance when establishing disease presence (miR-21 p-value = 0.0176, miR-141 p-value = 0.0032), disease follow-up (miR-21 p-value = 0.00154, miR141 p-value < 0.0005), and even disease severity. This article hopes to emphasize the potential of an additional clinical tool for the management of colorectal cancer