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Worst-of Options and Correlation Skew Under a Stochastic Correlation Framework
Marabel Romo, Jacinto - 2013
existence of correlation term structure and correlation skew. The article shows that the Wishart specification can generate … different patterns corresponding to the correlation skew for a wide range of correlation term structures.Another advantage of … correlation premium and show that the consideration of stochastic correlation is a key element for the valuation of these …
Persistent link: https://www.econbiz.de/10013091068
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On Cross-Currency Models with Stochastic Volatility and Correlated Interest Rates
Grzelak, Lech A. - 2014
We construct multi-currency models with stochastic volatility and correlated stochastic interest rates with a full matrix of correlations. We first deal with a foreign exchange (FX) model of Heston-type, in which the domestic and foreign interest rates are generated by the short-rate process of...
Persistent link: https://www.econbiz.de/10013069789
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A Closed-Form Solution for Outperformance Options with Stochastic Correlation and Stochastic Volatility
Marabel Romo, Jacinto - 2014
correlation between the underlying assets and are usually priced assuming constant instantaneous correlations.This article … depends crucially on the term structure of the correlation corresponding to the assets returns. Furthermore, the comparison of … institutions reveals the existence of a stochastic correlation premium …
Persistent link: https://www.econbiz.de/10013048541
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Pricing of Derivatives with Stochastically Correlated Underlyings
Büchler, Matthias - 2014
We price derivatives defined for different asset classes with a full stochastic dependence structure. We consider jointly geometric Brownian motions and mean-reversion processes with a a stochastic variance-covariance matrix driven by a Wishart process. These models cannot be treated within the...
Persistent link: https://www.econbiz.de/10013063402
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Deconstructing Correlation : Valuing Basket Options with Asset Smiles and Correlation Smiles
Austing, Peter - 2022
smiles and correlation smiles. At first sight, the task seems formidable. However, by reformulating the problem, we can …
Persistent link: https://www.econbiz.de/10013297391
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On Correlating Lévy Processes
Eberlein, Ernst; Madan, Dilip B. - 2010
the required correlation between the Brownian motions and we show how to correct for this. Pairwise tests illustrate the …
Persistent link: https://www.econbiz.de/10014045768
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Expected Correlation and Future Market Returns
Buss, Adrian - 2019
Implied correlation, jointly extracted from index and stock options, is a robust predictor of long-term market returns …
Persistent link: https://www.econbiz.de/10012900103
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Pricing commodity swing options
Daluiso, Roberto - 2020
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures contracts. In this paper we focus on the natural gas market and...
Persistent link: https://www.econbiz.de/10012843233
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Dynamic Jump Intensities and Risk Premiums in Crude Oil Futures and Options Markets
Christoffersen, Peter - 2020
Options on crude oil futures are the most actively traded commodity options. We develop a class of computationally efficient discrete-time jump models that allow for closed-form option valuation, and we use crude oil futures and options data to investigate the economic importance of jumps and...
Persistent link: https://www.econbiz.de/10012850215
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Commodity Spread Option with Cointegration
Nakajima, Katsushi - 2015
We derive the valuation formula of a European call option on the spread of two cointegrated commodity prices, based on the GSC (Gibson-Schwartz with cointegration) model. We also analyze the American commodity spread option including the early exercise premium representation and an analytical...
Persistent link: https://www.econbiz.de/10013023056