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Härdle, Wolfgang; Mysickova, Alena - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2008

, especially on the BS implied volatility. Implied binomialtrees (IBT) models capture the variations of the implied volatility … known as \volatility smile". They provide a discrete approximation to the continuous risk neutral process for the underlying … Barle and Cakici (BC). After the formation of IBT we can estimate the implied local volatility and thestate price density …

Persistent link: https://www.econbiz.de/10005860517

Stochastic Mortality,Macroeconomic Risks, andLife Insurer Solvency

Hanewald, Katja; Post, Thomas; Gründl, Helmut - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2009

Motivated by a recent demographic study establishing a link betweenmacroeconomic fluctuations and the mortality index kt in the Lee-Cartermodel, we assess the impact of macroeconomic fluctuations on the solvencyof a life insurance company. Liabilities in our stochastic simulationframework are...

Persistent link: https://www.econbiz.de/10005865446

Convenience Yields for CO2 Emission Allowance Futures Contracts

Borak, Szymon; Härdle, Wolfgang; Trück, Stefan; … - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2006

convenience yields for CO2 emission allowance futures. We conduct an empirical study on price behavior, volatility term structure … high fraction of the yields can be explained by the price level and volatility of the spot prices. We conclude that the …

Persistent link: https://www.econbiz.de/10005861246

Discounted Optimal Stopping for Maxima of some Jump-Diffusion Processes

Gapeev, Pavel V. - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2006

We present solutions to some discounted optimal stopping problems for the maximum process in a model driven by a Brownian motion and a compound Poisson process with exponential jumps. The method of proof is based on reducing the initial problems to integro-differential free-boundary problems...

Persistent link: https://www.econbiz.de/10005861277

Discounted Optimal Stopping for Maxima in Diffusion Models with Finite Horizon

Gapeev, Pavel V. - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2006

We present a solution to some discounted optimal stopping problem for the maximum of a geometric Brownian motion on a finite time interval. The method of proof is based on reducing the initial optimal stopping problem with the continuation region determined by an increasing continuous boundary...

Persistent link: https://www.econbiz.de/10005861278

Spectral calibration of exponential Lévy Models [2]

Belomestny, Denis; Reiß, Markus - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2006

The calibration of financial models has become rather important topic in recent years mainly because of the need to price increasingly complex options in a consistent way. The choice of the underlying model is crucial for the good performance of any calibration procedure. Recent empirical...

Persistent link: https://www.econbiz.de/10005861421

Spectral calibration of exponential Lévy Models [1]

Belomestny, Denis; Reiß, Markus - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2006

We investigate the problem of calibrating an exponential Lévy model based on market prices of vanilla options. We show that this inverse problem is in general severely ill-posed and we derive exact minimax rates of convergence. The estimation procedure we propose is based on the explicit...

Persistent link: https://www.econbiz.de/10005861424

Calibration Design of Implied Volatility Surfaces

Detlefsen, Kai; Härdle, Wolfgang K. - Sonderforschungsbereich Ökonomisches Risiko <Berlin>

The calibration of option pricing models leads to the minimization of an error functional. We show that its usual specification as a root mean squared error implies fluctuating exotics prices and possibly wrong prices...

Persistent link: https://www.econbiz.de/10005854719

Constrained General Regression in Pseudo-Sobolev Spaces with Application to Option Pricing

Hlávka, Zdeněk; Pešta, Michal - Sonderforschungsbereich Ökonomisches Risiko <Berlin>

State price density (SPD) contains important information concerning market expectations. In existing literature, a constrained estimator of the SPD is found by nonlinear least squares in a suitable Sobolev space...

Persistent link: https://www.econbiz.de/10005854964

Perpetual Barrier Options in Jump-Diffusion Models

Gapeev, Pavel V. - Sonderforschungsbereich Ökonomisches Risiko <Berlin>

We present a closed form solution to the perpetual American double barrier call option problem in a model driven by a Brownian motion and a compound Poissonprocess with exponential jumps. The method of proof is based on reducing the initialirregular optimal stopping problem to an...

Persistent link: https://www.econbiz.de/10005854967