incomplete information about the unknown stochastic volatility. The option price is determined by a uniform-price auction. Thus … an option pricing formula results from the interaction of market participants relying on private information on the … unknown stochastic volatility under an explicit market structure. This paper incorporates market microstructure considerations …

hedging derivatives and of intertemporal consumption choice. …

By extending the GARCH option pricing model of Duan (1995) to more flexible volatility estimation it is shown that the … prices of out-of-the-money options strongly depend on volatility features such as asymmetry. Results are provided for the … pronounced leverage effect, simulated threshold GARCH option prices are substantially closer to observed market prices than the …

A primary goal in modelling the dynamics of implied volatility surfaces (IVS) aims at reducing complexity. For this …, neglects the degenerated string structure of the implied volatility data and may result in a severe modelling bias. We propose … value at risk computations and scenario analysis. -- Implied Volatility Surface ; Smile ; Generalized Additive Models …

: Whether in risk management, portfolio hedging, or option pricing, we need to have a precise notion of the market's expectation … solved for the constant volatility parameter a using observed option prices. This is a more natural approach as the option …The analysis of volatility in financial markets has become a first rank issue in modern financial theory and practice …

prices caused by stochastic volatility. -- option pricing ; autoregression ; heteroskedasticity ; GARCH ; leverage effect … linear AR(l) conditional mean, one may ask how this predictability affects option prices. We investigate the dependence of … option prices on autoregressive dynamics under stylized facts of stock returns, i.e., conditional heteroskedasticity …

tool for options portfolios using the "Maximum Loss" methodology based on Principal Components. -- Implied Volatility ; DAX …

-gamma neutral, vega sensitive option portfolios. -- Common Principal Component Analysis ; Implied Volatility Surface ; Principal … maturities and moneyness dimension is neglected. In this paper we propose to estimate the implied volatility surface at each … point in time nonparametrically and to analyze the implied volatility surface slice by slice with a common principal …

Using option prices the expectations of the market participants concerning the underlying asset can be extracted as …