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Implied and local volatility surfaces for South African index and foreign exchange options

Kotzé, Antonie; Oosthuizen, Rudolf; Pindza, Edson - In: Journal of risk and financial management : JRFM 8 (2015) 1, pp. 43-82

Certain exotic options cannot be valued using closed-form solutions or even by numerical methods assuming constant volatility. Many exotics are priced in a local volatility framework. Pricing under local volatility has become a field of extensive research in finance, and various models are...

Persistent link: https://www.econbiz.de/10011552872

Use of Bayesian estimates to determine the volatility parameter input in the black-scholes and binomial option pricing models

Ho, Shu Wing; Lee, Alan J.; Marsden, Alastair - In: Journal of risk and financial management : JRFM 4 (2012) 1, pp. 74-96

The valuation of options and many other derivative instruments requires an estimation of exante or forward looking volatility. This paper adopts a Bayesian approach to estimate stock price volatility. We find evidence that overall Bayesian volatility estimates more closely approximate the...

Persistent link: https://www.econbiz.de/10011555938

Quanto pricing beyond Black-Scholes

Fink, Holger Maria; Mittnik, Stefan - In: Journal of risk and financial management : JRFM 14 (2021) 3, pp. 1-27

empirically assess the adequacy of quanto-option pricing models. The validation of quanto-pricing models has been a challenge so …

Persistent link: https://www.econbiz.de/10012520134

How much do negative probabilities matter in option pricing? : a case of a lattice-based approach for stochastic volatility models

Tseng, Chung-Li; Miao, Daniel Wei-Chung; Chung, San-Lin; … - In: Journal of risk and financial management : JRFM 14 (2021) 6, pp. 1-32

negative probabilities may impact option pricing in a lattice approach. It is shown in this paper that lattice feasibility can … underlying variables. Extensive numerical tests show that this optimized lattice model is robust for financial option valuations. …

Persistent link: https://www.econbiz.de/10012587779

Univariate and multivariate GARCH models applied to Bitcoin futures option pricing

Venter, Pierre J.; Maré, E. - In: Journal of risk and financial management : JRFM 14 (2021) 6, pp. 1-14

In this paper, the Heston-Nandi futures option pricing model is applied to Bitcoin futures options. The model prices … futures option pricing methodology based on a multivatiate GARCH model is developed. The empirical results show that a … symmetric model is a better fit when applied to Bitcoin futures returns, and also produces more accurate option prices compared …

Persistent link: https://www.econbiz.de/10012588206

On the asymptotic behavior of the optimal exercise price near expiry of an American put option under stochastic volatility

Chen, Wenting; Zhu, Song-Ping - In: Journal of risk and financial management : JRFM 15 (2022) 5, pp. 1-19

volatility near expiry. Through our analyses, we are able to show that the option price will be quite different from that …

Persistent link: https://www.econbiz.de/10013273116

The Generalized Gamma distribution as a useful RND under Heston's stochastic volatility model

Boukai, Benzion - In: Journal of risk and financial management : JRFM 15 (2022) 6, pp. 1-18

, satisfies Heston's solution and hence could be used for the direct risk-neutral valuation of the option price under Heston's SV … applicability of the GG distribution as an RND by modeling market option data on three large market-index exchange-traded funds (ETF … writing of this paper (August 2021), the option chain of each of the three market-index ETFs shows a pronounced skew of their …

Persistent link: https://www.econbiz.de/10013273577

Sample path generation of the stochastic volatility CGMY process and its application to path-dependent option pricing

Kim, Young Shin - In: Journal of risk and financial management : JRFM 14 (2021) 2/77, pp. 1-18

present the Monte-Carlo method for European and American option pricing with the sample path generation and calibrate model …

Persistent link: https://www.econbiz.de/10012484130

A Hausman test for partially linear models with an application to implied volatility surface

Jiang, Yixiao - In: Journal of risk and financial management : JRFM 13 (2020) 11/287, pp. 1-12

This paper develops a test that helps assess whether the term structure of option implied volatility is constant across … most years. The constancy of implied volatility term structure, in turn, implies that option traders shall feel confident …

Persistent link: https://www.econbiz.de/10012388603

Computational finance

Stentoft, Lars - In: Journal of risk and financial management : JRFM 13 (2020) 7/145, pp. 1-4

The field of computational finance is evolving ever faster. This book collects a number of novel contributions on the use of computational methods and techniques for modelling financial asset prices, returns, and volatility, and on the use of numerical methods for pricing, hedging, and risk...

Persistent link: https://www.econbiz.de/10012309311