On the Skew Stickiness Ratio
Masaaki Fukasawa
TL;DR
This paper introduces a new statistical measure called the skew stickiness ratio, which captures the joint behavior of asset prices and volatility, and provides a mathematical representation and asymptotic analysis within certain stochastic volatility models.
Contribution
It derives a representation formula for the skew stickiness ratio using advanced stochastic calculus and analyzes its asymptotic behavior under Bergomi-type models.
Findings
Representation formula for the skew stickiness ratio
Asymptotic behavior characterized under Bergomi models
Application of Itô-Wentzell and Clark-Ocone formulae
Abstract
The skew stickiness ratio is a statistic that captures the joint dynamics of an asset price and its volatility. We derive a representation formula for this quantity using the It\^o-Wentzell and Clark-Ocone formulae, and we apply it to analyze its asymptotics under Bergomi-type stochastic volatility models.
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Taxonomy
TopicsComplex Systems and Time Series Analysis · Stochastic processes and financial applications · Financial Risk and Volatility Modeling