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Time-discrete hedging of down-and-out puts with overnight trading gaps
Baule, Rainer; Rosenthal, Philip - In: Journal of risk and financial management : JRFM 15 (2022) 1, pp. 1-20
stochastic volatility and jumps are present. …
Persistent link: https://www.econbiz.de/10012813892
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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
exotic options listed on the JSE’s derivative exchanges are valued by local volatility models. These models needs a local … volatility. Many exotics are priced in a local volatility framework. Pricing under local volatility has become a field of … that assumes a constant volatility. The Johannesburg Stock Exchange (JSE) lists exotic options on its Can-Do platform. Most …
Persistent link: https://www.econbiz.de/10011552872
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Quanto pricing beyond Black-Scholes
Fink, Holger Maria; Mittnik, Stefan - In: Journal of risk and financial management : JRFM 14 (2021) 3, pp. 1-27
Since their introduction, quanto options have steadily gained popularity. Matching Black-Scholes-type pricing models and, more recently, a fat-tailed, normal tempered stable variant have been established. The objective here is to empirically assess the adequacy of quanto-option pricing models....
Persistent link: https://www.econbiz.de/10012520134
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Pricing perpetual American put options with asset-dependent discounting
Al-Hadad, Jonas; Palmowski, Zbigniew - In: Journal of risk and financial management : JRFM 14 (2021) 3, pp. 1-19
The main objective of this paper is to present an algorithm of pricing perpetual American put options with asset-dependent discounting. The value function of such an instrument can be described as VωAPut(s)=supτ∈TEs[e−∫0τω(Sw)dw(K−Sτ)+], where T is a family of stopping times, ω is...
Persistent link: https://www.econbiz.de/10012520043
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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
This paper proposes the sample path generation method for the stochastic volatility version of the CGMY process. We …
Persistent link: https://www.econbiz.de/10012484130
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Computational finance
Stentoft, Lars - In: Journal of risk and financial management : JRFM 13 (2020) 7/145, pp. 1-4
use of computational methods and techniques for modelling financial asset prices, returns, and volatility, and on the use …
Persistent link: https://www.econbiz.de/10012309311
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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
options prices under Heston's stochastic volatility (SV) model. We demonstrate that under a particular reparametrization, this … volatility 'smile', which indicates a likely distortion in the Black-Scholes modeling of such option data. Reflective of entirely … different market expectations, this distortion in the volatility 'smile' appears not to exist in the TLT option data. We provide …
Persistent link: https://www.econbiz.de/10013273577
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Statistical arbitrage with mean-reverting overnight price gaps on high-frequency data of the S&P 500
Stübinger, Johannes; Schneider, Lucas - In: Journal of risk and financial management : JRFM 12 (2019) 2/51, pp. 1-19
This paper develops a fully-fledged statistical arbitrage strategy based on a mean-reverting jump-diffusion model and applies it to high-frequency data of the S&P 500 constituents from January 1998-December 2015. In particular, the established stock selection and trading framework identifies...
Persistent link: https://www.econbiz.de/10012022240
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Pricing American options with a non-constant penalty parameter
Clevenhaus, Anna; Ehrhardt, Matthias; Günther, Michael; … - In: Journal of risk and financial management : JRFM 13 (2020) 6/124, pp. 1-22
As the American early exercise results in a free boundary problem, in this article we add a penalty term to obtain a partial differential equation, and we also focus on an improved definition of the penalty term for American options. We replace the constant penalty parameter with a...
Persistent link: https://www.econbiz.de/10012309047
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An analytic approach for pricing American options with regime switching
Chan, Leunglung; Zhu, Song-Ping - In: Journal of risk and financial management : JRFM 14 (2021) 5, pp. 1-20
volatility of underlying rely on hidden states of the economy which can be interpreted in terms of Markov chains. By means of the …
Persistent link: https://www.econbiz.de/10012533592