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Cross-sectional Variation of Option Implied Volatility Skew
Tian, Meng; Wu, Liuren - 2022
The stock options implied volatility skew reflects both the structural risk characteristics of the underlying company …-sectional option pricing model to separate the structural risk contributions from the information flow. The model identifies two … structural risk sources that contribute to the cross-sectional variation of the skew: the company's business cyclicality and its …
Persistent link: https://www.econbiz.de/10013404293
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European Option Pricing under Jump Diffusion with Proportional Transaction Costs
Xing, Haipeng - 2012
This paper considers the problem of European option pricing in the presence of proportional transaction costs when the price of the underlying follows a jump diffusion process. Using an approach that is based on maximization of the expected utility of terminal wealth, we transform the option...
Persistent link: https://www.econbiz.de/10013100960
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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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Implied Index and Option Pricing Errors : Evidence from the Taiwan Option Market
Wang, Ching-Ping - 2011
This study examines both restricted and unrestricted Black-Sholes models, according to Longstaff (1995). Using the Taiwan index options for each day from January 2005 to December 2008, the unrestricted model simultaneously solves the implied index value and implied volatility whereas the...
Persistent link: https://www.econbiz.de/10013123061
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Three Make a Dynamic Smile - Unspanned Skewness and Interacting Volatility Components in Option Valuation
Gruber, Peter H. - 2011
, suggesting volatility- unrelated skewness as a potentially useful reduced-form risk factor for reproducing some of the crisis …
Persistent link: https://www.econbiz.de/10013128475
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Transform Analysis for Pricing American Options Under Low-Dimensional Stochastic Volatility Models
Beliaeva, Natalia - 2009
This paper presents a new transform-based approach for path-independent lattice construction for pricing American options under low-dimensional stochastic volatility models. We derive multidimensional transforms which allow us to construct efficient path-independent lattices for virtually all...
Persistent link: https://www.econbiz.de/10013152949
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Small-Time Asymptotics for Implied Volatility Under a General Local-Stochastic Volatility Model
Forde, Martin - 2012
We build on of the work of Henry-Labordµere and Lewis on the small-time behaviour of the return distribution under a general local-stochastic volatility model with zero correlation. We do this using the Freidlin-Wentzell theory of large deviations for stochastic differential equations, and then...
Persistent link: https://www.econbiz.de/10013116586
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Asymptotic Formulae for Implied Volatility in the Heston Model
Forde, Martin - 2012
In this paper we prove an approximate formula expressed in terms of elementary functions for the implied volatility in the Heston model. The formula consists of the constant and first order terms in the large maturity expansion of the implied volatility function. The proof is based on...
Persistent link: https://www.econbiz.de/10013116644
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Retail Option Traders and the Implied Volatility Surface
Eaton, Gregory W.; Green, T. Clifton; Roseman, Brian; … - 2022
Retail investors dominate option trading in recent years. Individuals are net purchasers of options, particularly call, short-dated, and out-of-the-money options, although they tend to write long-dated puts. Retail brokerage outages are associated with reduced implied volatility overall, and the...
Persistent link: https://www.econbiz.de/10013289580
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A Closed-form Model-free Implied Volatility Formula through Delta Families
Cui, Zhenyu - 2020
In this paper, we derive a closed-form explicit model-free formula for the (Black-Scholes) implied volatility. The method is based on the novel use of the Dirac Delta function, corresponding delta families, and the change of variable technique. The formula is expressed through either a limit or...
Persistent link: https://www.econbiz.de/10012837341