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Diffusion Equation and Monte Carlo
Österling, Anders Eskil - 2011
Introducing the Brownian motion in the way of Einstein and Wiener we find the connection between a Wiener Process and the Heat Diffusion PDE.We solve the PDE analytically for some boundary conditions and then use the connection to the Wiener Process to solve more complex BVP's using Monte Carlo...
Persistent link: https://www.econbiz.de/10013125979
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Optimal Hedge Ratio Estimation During the Credit Crisis : An Application of Higher Moments
Apergis, Nicholas - 2012
This study aims to investigate and provide further insight into the dynamics of higher moments in the estimation of optimal hedge ratios during the recent credit crisis period by applying the Gram-Charlier expansion series. Furthermore, it compares the performance of the proposed model with...
Persistent link: https://www.econbiz.de/10013096408
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Estimating Probability Distributions of Future Asset Prices : Empirical Transformations from Option-Implied Risk-Neutral to Real-World Density Functions
de Vincent-Humphreys, Rupert - 2012
The prices of derivatives contracts can be used to estimate ‘risk-neutral' probability density functions that give an indication of the weight investors place on different future prices of their underlying assets, were they risk-neutral. In the likely case that investors are risk-averse, this...
Persistent link: https://www.econbiz.de/10013104539
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Futures Hedge Profit Measurement Error-Correction Model vs. Regression Approach Hedge Ratios, and Data Error Effects
Ferguson, Robert - 2017
This paper proposes that, and explains why, hedge profits and regression approach hedge ratios should be calculated using cost-of-carry-adjusted price changes. This Modified Regression Method for determining hedge ratios is denoted MRM. The paper discusses the Error-Correction Model for hedge...
Persistent link: https://www.econbiz.de/10012953645
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Estimating the Value of Information
Kadan, Ohad - 2020
We derive a general expression for the value of information to a price-taking investor in a dynamic environment and provide a framework for its estimation. We study the value of both private and public information and break it down into its instrumental and psychic parts. To illustrate, we...
Persistent link: https://www.econbiz.de/10012855462
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Asymptotics of Forward Implied Volatility
Jacquier, Antoine (Jack) - 2015
We prove here a general closed-form expansion formula for forward-start options and the forward implied volatility smile in a large class of models, including the Heston stochastic volatility and time-changed exponential Levy models.This expansion applies to both small and large maturities and...
Persistent link: https://www.econbiz.de/10013036196
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Quadratic Variation
Madan, Dilip B.; Wang, King - 2021
Time changes of Brownian motion impose restrictive jump structures in the motion of asset prices. Quadratic variations also depart from time changes. Joint Laplace Fourier transforms for quadratic variation and the stock are developed. They are used to study the multiple of the cap strike over...
Persistent link: https://www.econbiz.de/10013245486
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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
regression and simulation-based least-squares Monte Carlo method by using put-call symmetry. The results show that, for a large …
Persistent link: https://www.econbiz.de/10012022212
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Decomposing portfolio value-at-risk : a general analysis
Hallerbach, Winfried G. - 1999 - This rev.: May 10, 1999
the underlying statistical distributions, a variety of analyticalmethods and simulation-based methods are available. Aside … orhistorical and Monte Carlo simulation methods. Although these approaches to overall VaR estimation have receivedsubstantial … and incremental VaR in either a non-normal analytical setting or a MonteCarlo / historical simulation context.This paper …
Persistent link: https://www.econbiz.de/10011301159
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American Option Pricing Using Simulation and Regression : Numerical Convergence Results
Stentoft, Lars - 2011
Recently, simulation methods combined with regression techniques have gained importance when it comes to American …
Persistent link: https://www.econbiz.de/10013118205