Byoung Ki Seo

Ulsan National Institute of Science and Technology | UNIST · Department of Finance/Accounting

The stochastic-alpha-beta-rho (SABR) model has been widely adopted in options trading. In particular, the normal ($\beta=0$) SABR model is a popular model choice for interest rates because it allows negative asset values. The option price and delta under the SABR model are typically obtained via asymptotic implied volatility approximation, but thes...

This study analyzes the impact of US central bank communication on financial markets in emerging economies. We find that informal communication from the Fed positively influences the Korean stock market at a greater magnitude than the US stock market. The results show that the Korean stock market experienced higher excess return when Korea's moneta...

This study proposes a versatile model for the dynamics of the best bid and ask prices using an extended Hawkes process. The model incorporates the zero intensities of the spread-narrowing processes at the minimum bid-ask spread, spread-dependent intensities, possible negative excitement, and nonnegative intensities. We apply the model to high-frequ...

This study proposes a versatile model for the dynamics of the best bid and ask prices using an extended Hawkes process. The model incorporates the zero intensities of the spread-narrowing processes at the minimum bid–ask spread, spread-dependent intensities, possible negative excitement, and nonnegative intensities. We apply the model to high-frequ...

This study derives the expected liquidity cost when performing the delta hedging process of a European option. This cost is represented by an integration formula that includes European option prices and a certain function depending on the delta process. We first define a unit liquidity cost and then show that the liquidity cost is a multiplication...

This study derives the expected liquidity cost when performing the delta hedging process of a European option. This cost is represented by an integration formula that includes European option prices and a certain function depending on the delta process. We first define a unit liquidity cost and then show that the liquidity cost is a multiplication...

We examine the effect of the oil and gas firms' use of derivatives for hedging risks on the marginal value of cash holdings. Analyzing 155 U.S. oil and gas producers from 1998 to 2017, we find that the use of derivatives for hedging risks, especially oil and gas‐related risk, reduces the marginal value of corporate cash holdings. Furthermore, the e...

This study examine the theoretical and empirical perspectives of the symmetric Hawkes model of the price tick structure. Combined with the maximum likelihood estimation, the model provides a proper method of volatility estimation specialized in ultra-high-frequency analysis. Empirical studies based on the model using the ultra-high-frequency data o...

The third moment variation of a financial asset return process is defined by the quadratic covariation between the return and square return processes. The skew and fat tail risk of an underlying asset can be hedged using a third moment variation swap under which a predetermined fixed leg and the floating leg of the realized third moment variation a...

A simple Hawkes model have been developed for the price tick structure dynamics incorporating market microstructure noise and trade clustering. In this paper, the model is extended with random mark to deal with more realistic price tick structures of equities. We examine the impact of jump in price dynamics to the future movements and dependency be...

For option pricing models and heavy‐tailed distributions, this study proposes a continuous‐time stochastic volatility model based on an arithmetic Brownian motion: a one‐parameter extension of the normal stochastic alpha‐beta‐rho (SABR) model. Using two generalized Bougerol's identities in the literature, the study shows that our model has a closed...

This study investigates the relationship between energy prices and anticipated changes in monetary policy during the announcement periods of the Federal Open Market Committee (FOMC). According to the findings, the energy market experienced abnormal price movements before the scheduled FOMC announcements, and these movements are related to the FOMC'...

For option pricing models and heavy-tailed distributions, this study proposes a continuous-time stochastic volatility model based on an arithmetic Brownian motion: a one-parameter extension of the normal stochastic alpha-beta-rho (SABR) model. Using two generalized Bougerol's identities in the literature, the study shows that our model has a closed...

We discuss how to determine the margin of interest rate portfolio under Korean interest rate market when the trades are cleared through a clearing house. The analysis is based on the filtered historical simulation using the EWMA and GARCH model for the interest rate process. Due to the irregular feature in the short tenor rates, we observe the inst...

The third moment variation of a financial asset return process is defined by the quadratic covariation between the return and square return processes. The skew and fat tail risk of an underlying asset can be hedged using a third moment variation swap under which a predetermined fixed leg and the floating leg of the realized third moment variation a...

This study examine the theoretical and empirical perspectives of the symmetric Hawkes model of the price tick structure. Combined with the maximum likelihood estimation, the model provides a proper method of volatility estimation specialized in ultra-high-frequency analysis. Empirical studies based on the model using the ultra-high-frequency data o...

A simple Hawkes model have been developed for the price tick structure dynamics incorporating market microstructure noise and trade clustering. In this paper, the model is extended with random mark to deal with more realistic price tick structures of equities. We examine the impact of jump in price dynamics to the future movements and dependency be...

Let Tx = x+θ (mod 1). Define Kn(x,y) = min{j≥1:TjyQn(x)}, where Qn(x) = [2⁻ⁿi,2⁻ⁿ(i+1)) for 2⁻ⁿi≤x<2⁻ⁿ(i+1). Then for irrational θ of type η lim infn→∞ (log Kn(x,y)/n) = 1 a.e., lim supn→∞ (log Kn(x,y)/n) = η a.e. Since the set of irrational numbers of type 1 has measure 1, for almost every θ the limit exists and is 1.

Let $0 < \theta < 1$ be irrational and $T_{\theta} x = x + \theta \bmod 1$ on $[0,1)$. Consider the partition $\mathcal{Q}_n = \{[(i - 1) / 2^n, i/2^n) : 1 \leq i \leq 2^n\}$ and let $Q_n(x)$ denote the interval in $\mathcal{Q}_n$ containing $x$. Define two versions of the first return time: $J_n(x) = \min\{ j \geq 1 : \| x - {T_{\theta}}^j x \| =...