The price-volatility feedback rate: an implementable mathematical indicator of market stability
by Emilio Barucci, Paul Malliavin, Maria Elvira Mancino, Roberto Renò and Anton Thalmaier

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 which is implemented on high frequency time series.

Mathematical Finance 13 (2003) 17-35

The paper is available here:

Emilio Barucci
Paul Malliavin
Maria Elvira Mancino
Roberto Renò
Anton Thalmaier

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