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Performance Measurement for Option Portfolios in a Stochastic Volatility Framework
Baule, Rainer - 2019
underlying, their exposure to volatility risk, and their time decay. Our contribution to the literature is twofold: First, we … volatility according to Heston (1993). Within this setting, the portfolio returns are explained by the market and an additional … option factor, i.e., a portfolio of standard options exposed to volatility risk. We show that (i) any option factor is …
Persistent link: https://www.econbiz.de/10012900121
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Estimation of Multivariate Asset Models with Jumps
Loregian, Angela - 2018
We propose a consistent and computationally efficient 2-step methodology for the estimation of multidimensional non-Gaussian asset models built using Lévy processes. The proposed framework allows for dependence between assets and different tail-behaviors and jump structures for each asset. Our...
Persistent link: https://www.econbiz.de/10012937321
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Risk management of interest rate derivative portfolios : a stochastic control approach
Kiriakopoulos, Konstantinos; Koulis, Alexandros - In: Journal of risk and financial management : JRFM 7 (2014) 4, pp. 130-149
In this paper we formulate the Risk Management Control problem in the interest rate area as a constrained stochastic portfolio optimization problem. The utility that we use can be any continuous function and based on the viscosity theory, the unique solution of the problem is guaranteed. The...
Persistent link: https://www.econbiz.de/10011552973
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Study of Lévy Processes in Financial Modeling
Peng, Yun - 2011
This study shows how to simulate Lévy process to price options and also demonstrate empirically that Lévy process can do a better job explaining option prices than Black-Scholes Model. This study also shows how to simulate Wiener process
Persistent link: https://www.econbiz.de/10013123172
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Continuous Time Mean-Variance Optimal Portfolio Allocation Under Jump Diffusion : An Numerical Impulse Control Approach
Dang, Duy-Minh - 2013
We present efficient partial differential equation (PDE) methods for continuous time mean-variance portfolio allocation problems when the underlying risky asset follows a jump-diffusion. The standard formulation of mean-variance optimal portfolio allocation problems, where the total wealth is...
Persistent link: https://www.econbiz.de/10013084034
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Convertible Bonds Valuation in a Jump Diffusion Setting with Stochastic Interest Rates
Ballotta, Laura - 2019
This paper proposes an integrated pricing framework for convertible bonds, which comprises firm value evolving as an exponential jump diffusion, correlated stochastic interest rates movements and an efficient numerical pricing scheme. By construction, the proposed stochastic model fits in the...
Persistent link: https://www.econbiz.de/10012906221
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The Basis Goes Stochastic : A Jump-Diffusion Model for Financial Risk Applications
Li, Minqiang - 2016
There are several pricing and risk model applications where the assumption of a deterministic LIBOR-OIS basis can lead to severe mispricing. By modeling such a basis using a jump-diffusion process, we show how stochastic basis can impact the valuation of specific deals such as zero-coupon swaps,...
Persistent link: https://www.econbiz.de/10012984693
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Mean-Variance Hedging and Optimal Investment in Heston's Model with Correlation
Černý, Aleš - 2020
systematically with the volatility of stock returns. We allow for correlation between stock returns and their volatility (so …
Persistent link: https://www.econbiz.de/10012705869
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Option pricing and portfolio optimization under a multi-asset jump-diffusion model with systemic risk
Makarov, Roman - In: Risks : open access journal 11 (2023) 12, pp. 1-24
We explore a multi-asset jump-diffusion pricing model, combining a systemic risk asset with several conditionally independent ordinary assets. Our approach allows for analyzing and modeling a portfolio that integrates high-activity security, such as an exchange trading fund (ETF) tracking a...
Persistent link: https://www.econbiz.de/10014446758
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Hedging Volatility Risk of Exotic Structures Using Variance Derivatives
Zarov, Iliyan Radev - 2012
volatility jump diffusion model …
Persistent link: https://www.econbiz.de/10013113731