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Lord, Roger; Kahl, Christian - Tinbergen Institute - 2006

The characteristic functions of many affine jump-diffusion models, such as Heston’s stochastic volatility model and all of its extensions, involve multivalued functions such as the complex logarithm. If we restrict the logarithm to its principal branch, as is done in most software packages,...

Persistent link: https://www.econbiz.de/10005137076

Optimal Fourier Inversion in Semi-analytical Option Pricing

Lord, Roger; Kahl, Christian - Tinbergen Institute - 2006

At the time of writing this article, Fourier inversion is the computational method of choice for a fast and accurate calculation of plain vanilla option prices in models with an analytically available characteristic function. Shifting the contour of integration along the complex plane allows for...

Persistent link: https://www.econbiz.de/10005209502

A Bayesian Analysis of Unobserved Component Models using Ox

Bos, Charles S. - Tinbergen Institute

Estimation of the volatility of time series has taken off since the introduction of the GARCH and stochastic volatility …

Persistent link: https://www.econbiz.de/10008867496

Relating Stochastic Volatility Estimation Methods

Bos, Charles S. - Tinbergen Institute - 2011

Estimation of the volatility of time series has taken off since the introduction of the GARCH and stochastic volatility … unobserved stochastic volatility, and the varying approaches that have been taken for such estimation. In order to simplify the … comprehension of these estimation methods, the main methods for estimating stochastic volatility are discussed, with focus on their …

Persistent link: https://www.econbiz.de/10008867506

Pricing Double Barrier Options: An Analytical Approach

Pelsser, Antoon - Tinbergen Institute - 1997

Double barrier options have become popular instruments in derivative markets. Several papers have already analysed double knock-out call and put options using different methods. In a recent paper, Geman and Yor (1996) derive expressions for the Laplace transform of the double barrrier option...

Persistent link: https://www.econbiz.de/10005281742

Modeling and Forecasting S&P 500 Volatility: Long Memory, Structural Breaks and Nonlinearity

Martens, Martin; Dijk, Dick van; Pooter, Michiel de - Tinbergen Institute - 2004

The sum of squared intraday returns provides an unbiased and almost error-free measure of ex-post volatility. In this paper we develop a nonlinear Autoregressive Fractionally Integrated Moving Average (ARFIMA) model for realized volatility, which accommodates level shifts, day-of-the-week...

Persistent link: https://www.econbiz.de/10005137234

Long Memory and Level Shifts: Re-Analyzing Inflation Rates

Bos, Charles S.; Franses, Philip Hans; Ooms, Marius - Tinbergen Institute - 1998

<p>A key application of long memory time series models concerns inflation. Long memory implies that shocks have a long-lasting effect. It may however be that empirical evidence for long memory is caused by neglecting one or more level shifts. Since such level shifts are not unlikely for inflation,...</p>

Persistent link: https://www.econbiz.de/10005209483

Forecasting Volatility with Copula-Based Time Series Models

Sokolinskiy, Oleg; Dijk, Dick van - Tinbergen Institute - 2011

This paper develops a novel approach to modeling and forecasting realized volatility (RV) measures based on copula functions. Copula-based time series models can capture relevant characteristics of volatility such as nonlinear dynamics and long-memory type behavior in a flexible yet parsimonious...

Persistent link: https://www.econbiz.de/10009293998

A Comparison of Biased Simulation Schemes for Stochastic Volatility Models

Lord, Roger; Koekkoek, Remmert; Dijk, Dick van - Tinbergen Institute - 2006

When using an Euler discretisation to simulate a mean-reverting square root process, one runs into the problem that while the process itself is guaranteed to be nonnegative, the discretisation is not. Although an exact and efficient simulation algorithm exists for this process, at present this...

Persistent link: https://www.econbiz.de/10005136945

Stock Index Volatility Forecasting with High Frequency Data

Hol, Eugenie; Koopman, Siem Jan - Tinbergen Institute - 2002

The increasing availability of financial market data at intraday frequencies has not only led to the development of improved ex-post volatility measurements but has also inspired research into their potential value as an informa-tion source for longer horizon volatility forecasts. In this paper...

Persistent link: https://www.econbiz.de/10005136957