Adjusting Exponential Levy Models Towards the Simultaneous Calibration of Market Prices for Crash Cliquets

Option calibrated exponential Lévy models are observed to typically overprice crash cliquets. Typical model Lévy tails are then not crash market consistent. A general tail thinning strategy is introduced that may be implemented on a class of parametric Lévy models closed under exponential tilting. Implementation on CGMY leads to the CGAKMY model with thinning function of (1 A|x|)^{-K}. It is observed that this model adjustment can be crash market consistent

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Year of publication:	2015
Authors:	Carr, Peter
Other Persons:	Khanna, Ajay (contributor) ; Madan, Dilip B. (contributor)
Publisher:	[2015]: [S.l.] : SSRN

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Extent:	1 Online-Ressource (23 p)
Type of publication:	Book / Working Paper
Language:	English
Notes:	Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 10, 2014 erstellt
Other identifiers:	10.2139/ssrn.2635607 [DOI]
Classification:	G10 - General Financial Markets. General ; G11 - Portfolio Choice ; G13 - Contingent Pricing; Futures Pricing
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10013018792