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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
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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
volatility. This paper adopts a Bayesian approach to estimate stock price volatility. We find evidence that overall Bayesian … volatility estimates more closely approximate the implied volatility of stocks derived from traded call and put options prices … compared to historical volatility estimates sourced from IVolatility.com (“IVolatility”). Our evidence suggests use of the …
Persistent link: https://www.econbiz.de/10011555938
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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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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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Variance swap replication : discrete or continuous?
Le Floc'h, Fabien - In: Journal of risk and financial management : JRFM 11 (2018) 1, pp. 1-15
The popular replication formula to price variance swaps assumes continuity of traded option strikes. In practice, however, there is only a discrete set of option strikes traded on the market. We present here different discrete replication strategies and explain why the continuous replication...
Persistent link: https://www.econbiz.de/10011855148
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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
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Correcting the bias in the Practitioner Black-Scholes method
Yin, Yun; Moffatt, Peter G. - In: Journal of risk and financial management : JRFM 12 (2019) 4/157, pp. 1-12
applied to the fitted values (i.e., the Black-Scholes formula) being a highly non-linear function of implied volatility. We …
Persistent link: https://www.econbiz.de/10012172997