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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

A semiparametric factor model for electricity forwardcurve dynamics

Borak, Szymon; Weron, Rafał - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2008

In this paper we introduce the dynamic semiparametric factor model (DSFM) for electricity forward curves. The biggest advantage of our approach is that it not only leads to smooth,seasonal forward curves extracted from exchange traded futures and forward electricity contracts, but also to a...

Persistent link: https://www.econbiz.de/10005860496

Testing Monotonicity of Pricing Kernels

Golubev, Yuri; Härdle, Wolfgang; Timonfeev, Roman - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2007

The behaviour of market agents has always been extensively covered in the literature. Risk averse behaviour, described by von Neumann and Morgenstern (1944) via a concave utility function, is considered to be a cornerstone of classical economics. Agents prefer a fixed profit over uncertain...

Persistent link: https://www.econbiz.de/10005860758

Empirical Pricing Kernels and Investor Preferences

Detlefsen, Kai; Härdle, Wolfgang; Moro, Rouslan - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2007

three market regimes. Aconsistent parametric framework of stochastic volatility is used. All empiricalmarket utility …

Persistent link: https://www.econbiz.de/10005861046

CDO Pricing with Copulae

Choroś, Barbara; Härdle, Wolfgang; Okhrin, Ostap - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2009

Modeling the portfolio credit risk is one of the crucial issues of the last yearsin the financial problems. We propose the valuation model of Collateralized DebtObligations based on a one- and two-parameter copula and default intensities estimatedfrom market data. The presented method is used to...

Persistent link: https://www.econbiz.de/10005865449

Value-at-Risk and Expected Shortfall when there is long range dependence

Härdle, Wolfgang; Mungo, Julius - Sonderforschungsbereich Ökonomisches Risiko <Berlin>

characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in … market volatility, with significant impact on pricing and forecasting of market volatility. The implication is that models … that accomodate long memory hold the promise of improved long-run volatility forecast as well as accurate pricing of long …

Persistent link: https://www.econbiz.de/10005860751

A stochastic volatility Libor model and its robust calibration

Belomestny, Denis; Matthew, Stanley; Schoenmakers, John - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2007

In this paper we propose a Libor model with a high-dimensional speciallystructured system of driving CIR volatility …

Persistent link: https://www.econbiz.de/10005860831

Long Memory Persistence in the Factor of Implied Volatility Dynamics

Härdle, Wolfgang; Mungo, Julius - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2007

The volatility implied by observed market prices as a function of the strikeand time to maturity form an Implied … Volatility Surface (IV S). Practicalapplications require reducing the dimension and characterize its dynamicsthrough a small … investigating long range dependencein the factor loadings series. Our result reveals that shocks to volatility persistfor a very …

Persistent link: https://www.econbiz.de/10005861020

Time Series Modelling with Semiparametric Factor Dynamics

Borak, Szymon; Härdle, Wolfgang; Mammen, Enno; Park, … - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2007

High-dimensional regression problems which reveal dynamic behavior are typicallyanalyzed by time propagation of a few number of factors. The inference on thewhole system is then based on the low-dimensional time series analysis. Such highdimensional problems occur frequently in many different...

Persistent link: https://www.econbiz.de/10005861034

A Dynamic Semiparametric Factor Model for Implied Volatility String Dynamics

Fengler, Matthias R.; Härdle, Wolfgang K.; Mammen, Enno - Sonderforschungsbereich Ökonomisches Risiko <Berlin> - 2005

A primary goal in modelling the implied volatility surface (IVS) for pricing andhedging aims at reducing complexity … approach, however, neglects the degenerated string structure of the implied volatility data and may result in a modelling bias … generalized vega-hedging strategy for exotic options that are priced in the local volatility framework. The generalized vega …

Persistent link: https://www.econbiz.de/10005862108