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You can view the price of an option as the cost to dynamically replicate it. The more volatility, the more costs you will have trading the underlying to keep your delta equal to 0 (I'm assuming you sold the option, hence a negative gamma position). So, if at any spot, any date your local vol is above 0.194, rebalancing the portfolio will be constantly more ...


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So you are asking whether the function Box.test requires standardized or raw residuals as input? I do not know this function but as you mention that the results change based on your input it should be such that the function requires standardized values. In case a standardization is implemented directly the output should not differ because you either plug-in ...


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There are different methodologies to detect a change in the market efficiency, both in the market and firm-specific cases. In the FIRM-SPECIFIC case, the most common procedure is the event study methodology; you can find how to construct an event-study case explained in Kothari & Warner (2006), who collected all the event study methodology implemented ...



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