Geometric analysis of iterated cross-volatilities of asset prices is adopted to assess the stability of the (risk-free) measure under infinitesimal perturbations. Perturbations of asset prices evolve through time according to an ordinary linear differential equation (hedged transfer). The decay (feedback) rate is explicitly computed through a Fourier series method implemented on high frequency time series.
Barucci, E., Malliavin, P., Mancino, M., Thalmaier, P., Reno', R. (2003). The price-volatility feedback rate: an implementable mathematical indicator of market stability. MATHEMATICAL FINANCE, 13(1), 17-35 [10.1111/1467-9965.t01-1-00003].
The price-volatility feedback rate: an implementable mathematical indicator of market stability
Reno', Roberto
2003-01-01
Abstract
Geometric analysis of iterated cross-volatilities of asset prices is adopted to assess the stability of the (risk-free) measure under infinitesimal perturbations. Perturbations of asset prices evolve through time according to an ordinary linear differential equation (hedged transfer). The decay (feedback) rate is explicitly computed through a Fourier series method implemented on high frequency time series.
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https://hdl.handle.net/11365/3994
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