In this article, we have tested the volatility of the returns of the 3 – month AstraZeneca call option contract for changing conditional variances. Threshold generalized autoregressive conditional heteroskedastic models, (TGARCH), exponential generalized autoregressive conditional...

We analyze the implied volatility smile of a lognormal distribution on a 3 – month Lundbeck call option contract using the Brownian motion. There is significant time variation in the implied volatility smile and the traditional Black – Scholes model can not explain this deviation. The Black...

We analyze the implied volatility smile of a lognormal distribution on a on a 6 – month EUR/USD call currency option contract using the ratio of strike and share price. There is significant time variation in the implied volatility smile and the traditional Black – Scholes model can not...

We analyze the implied volatility smile of a lognormal distribution on a on a 6 – month EUR/USD call currency option contract using a random standard normal variable. There is significant time variation in the implied volatility smile and the traditional Black – Scholes model can not explain...

We analyze the implied volatility smile of a lognormal distribution on a 3 – month Danske bank call option contract using the option delta. There is significant time variation in the implied volatility smile and the traditional Black – Scholes model can not explain this deviation. The Black...

Autoregressive Conditional Heteroskedastic models (ARCH), and Generalized Autoregressive Conditional Heteroskedastic models, (GARCH) take into account the non-linearity that arises in the financial time series. Well known anomalies such as the calendar effects, January effect and seasonality's...

In this article, we focus on one-period and two-period binomial methods to calculate the payoff of the expected value of the 6 month call option of Nordea Bank based on probabilities of share changes. Then, we discount the expected value of the call option back to today base on the risk-free...

A standardized swap contract involves the exchange of principals, regular coupon payments and return back of the principal in addition to the last interest payment at the expiration of the swap agreement. The most common contracts are plain vanilla interest rate, commodity or foreign exchange...

In this article, we test the implied volatility of a credit risk of a bond, an interest rate swap and a swaption of well known Swedish bank such as the Nordea bank. To minimize the interest and the credit risk of the contract the interest rate swap is linked to an option. The integration of an...

In this article, we estimate Lamda in matlab to calculate the leverage return of 3 months call and put options implied volatility by comparing the theoretical price with the market price of a Danish investment bank. There is significant time variation in the implied volatility and the...