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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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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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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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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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GARCH option pricing models and the variance risk premium
Zhang, WenJun; Zhang, Jin E. - In: Journal of risk and financial management : JRFM 13 (2020) 3/51, pp. 1-21
one-month variance swap rate, i.e., the CBOE Volatility Index (VIX) accurately. Our research suggests that one should use …
Persistent link: https://www.econbiz.de/10012174118
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VaR and CVaR implied in option prices
Barone-Adesi, Giovanni - In: Journal of risk and financial management : JRFM 9 (2016) 1, pp. 1-6
VaR (Value at Risk) and CVaR (Conditional Value at Risk) are implied by option prices. Their relationships to option prices are derived initially under the pricing measure. It does not require assumptions about the distribution of portfolio returns. The effects of changes of measure are modest...
Persistent link: https://www.econbiz.de/10011544027
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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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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 … "volatility smile" and an additive quadratic time effect is a statistically adequate depiction of the implied volatility data for … 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
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Quadratic hedging of basis risk
Hulley, Hardy; McWalter, Thomas A. - In: Journal of risk and financial management : JRFM 8 (2015) 1, pp. 83-102
This paper examines a simple basis risk model based on correlated geometric Brownian motions. We apply quadratic criteria to minimize basis risk and hedge in an optimal manner. Initially, we derive the Föllmer–Schweizer decomposition for a European claim. This allows pricing and hedging under...
Persistent link: https://www.econbiz.de/10011552886