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The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility index, can be hard to measure with accuracy due to the lack of precise prices for options with strikes in the tails of the return distribution. This is reflected in practice as the...
Persistent link: https://www.econbiz.de/10014047423
This paper addresses several theoretical and practical issues in option pricing and implied volatility calibration in a … in general that any FBSI volatility surface will be free from calendar-spread arbitrage. The FBSI model is empirically …
Persistent link: https://www.econbiz.de/10012969066
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
of multi-factor model, we demonstrate how to calculate the optimal hedging ratio for VIX future to hedge VIX option. We …
Persistent link: https://www.econbiz.de/10013088143
The valuation of options and many other derivative instruments requires an estimation of exante or forward looking volatility. This paper adopts a Bayesian approach to estimate stock price volatility. We find evidence that overall Bayesian volatility estimates more closely approximate the...
Persistent link: https://www.econbiz.de/10011555938
This study compares the performances of neural network and Black-Scholes models in pricing BIST30 (Borsa Istanbul) index call and put options with different volatility forecasting approaches. Since the volatility is the key parameter in pricing options, GARCH (Generalized Autoregressive...
Persistent link: https://www.econbiz.de/10013334825
S&P 500 index return and option data for the 1996-2019 period, the model captures the IV surface movements well and uses …
Persistent link: https://www.econbiz.de/10014258470
Persistent link: https://www.econbiz.de/10012253419
Persistent link: https://www.econbiz.de/10012543248
discretization is performed on the partial integro-differential equation, and the American option pricing problem is formulated as a …
Persistent link: https://www.econbiz.de/10014186631