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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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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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Net buying pressure and informed trading in the options market : evidence from earnings announcements
Badshah, Ihsan Ullah; Koerniadi, Hardjo - In: Journal of risk and financial management : JRFM 15 (2022) 2, pp. 1-9
trading around quarterly earnings announcements is either directionally motivated and/or volatility motivated. We found … volatility-motivated option trading, and our results suggest that this type of option trading could be motivated by hedging …
Persistent link: https://www.econbiz.de/10012818141
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Arbitrage free approximations to candidate volatility surface quotations
Madan, Dilip B.; Schoutens, Wim - In: Journal of risk and financial management : JRFM 12 (2019) 2/69, pp. 1-21
difficulties for the use of Fourier inversion methodologies in volatility surface calibration. Continuous time Markov chain …
Persistent link: https://www.econbiz.de/10012022144
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Efficient numerical pricing of American call options using symmetry arguments
Stentoft, Lars - In: Journal of risk and financial management : JRFM 12 (2019) 2/59, pp. 1-26
98% . The relative importance of using the symmetric method increases with option maturity and with asset volatility …
Persistent link: https://www.econbiz.de/10012022212
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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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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 model, such as the Heston model, has not been reported at all. Adopting the method of matched asymptotic expansions … volatility near expiry. Through our analyses, we are able to show that the option price will be quite different from that … the constant volatility case if the spot volatility is given the same value as the constant volatility in the Black …
Persistent link: https://www.econbiz.de/10013273116
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Saddlepoint method for pricing European options under Markov-switching Heston’s stochastic volatility model
Zhang, Mengzhe; Chan, Leunglung - In: Journal of risk and financial management : JRFM 15 (2022) 9, pp. 1-9
Markov-switching Heston's stochastic volatility model. Under this framework, the expected return and the long-term mean of … evidence that the Markov-switching Heston's stochastic volatility model performs well in capturing major events affecting price … volatility model. …
Persistent link: https://www.econbiz.de/10013399717
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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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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
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 … exotic options listed on the JSE’s derivative exchanges are valued by local volatility models. These models needs a local …
Persistent link: https://www.econbiz.de/10011552872