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Paper / 2016SMQ / 5219950162745
The microstructural foundations of leverage effect and rough volatility
El Euch Omar / Fukasawa Masaaki / Masaaki Fukasawa / Mathieu Rosenbaum / Omar El Euch / Rosenbaum Mathieu
high frequency trading / market microstructureResource overview

The microstructural foundations of leverage effect and rough volatility

Paper2016

by El Euch Omar, Fukasawa Masaaki, Masaaki Fukasawa, Mathieu Rosenbaum, Omar El Euch, Rosenbaum Mathieu

Tags
high frequency tradingmarket microstructurerough volatilitystochastic processes

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Suggested foundations for volatility models and surfaces and market microstructure and execution. Specialist prerequisites vary by paper.

Before you read

  1. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow diffusion-based models and their assumptions.

  2. ARCH and GARCH

    Separate conditional volatility from observed returns.

  3. Order Books

    Read bid, ask, depth and queue-based market state.

  4. Order Flow and Adverse Selection

    Understand why fills and order flow can carry information.

Go further

  1. Stochastic Volatility and the Heston Model

    Study a correlated stochastic-variance model.

  2. Reading the Implied Vol Surface — Moneyness, Term Structure, and Quoting Conventions

    Interpret prices across strikes and expiries.

  3. Market Impact

    Connect trading speed and size to execution cost.

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