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Option pricing with Markov switching stochastic volatility models
Cheng, Yiying - In: Advances in Pacific Basin business, economics, and finance 8 (2020), pp. 53-63
Persistent link: https://www.econbiz.de/10012601380
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Pricing European options under stochastic volatility models: Case of five-parameter variance-gamma process
Nzokem, Aubain Hilaire - In: Journal of Risk and Financial Management 16 (2023) 1, pp. 1-28
The paper builds a Variance-Gamma (VG) model with five parameters: location (μ), symmetry (δ), volatility (σ), shape (»), and scale (θ); and studies its application to the pricing of European options. The results of our analysis show that the five-parameter VG model is a stochastic...
Persistent link: https://www.econbiz.de/10014332830
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Pricing European options under stochastic volatility models : case of five-parameter variance-gamma process
Nzokem, Aubain Hilaire - In: Journal of risk and financial management : JRFM 16 (2023) 1, pp. 1-28
The paper builds a Variance-Gamma (VG) model with five parameters: location (μ), symmetry (δ), volatility (σ), shape (α), and scale (θ); and studies its application to the pricing of European options. The results of our analysis show that the five-parameter VG model is a stochastic...
Persistent link: https://www.econbiz.de/10014288862
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Why the Rotation Count Algorithm works
Lord, Roger; Kahl, Christian - 2006
The characteristic functions of many affine jump-diffusion models, such as Heston’s stochastic volatility model and all of its extensions, involve multivalued functions such as the complex logarithm. If we restrict the logarithm to its principal branch, as is done in most software packages,...
Persistent link: https://www.econbiz.de/10010325214
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Optimal Fourier Inversion in Semi-analytical Option Pricing
Lord, Roger; Kahl, Christian - 2006
At the time of writing this article, Fourier inversion is the computational method of choice for a fast and accurate calculation of plain vanilla option prices in models with an analytically available characteristic function. Shifting the contour of integration along the complex plane allows for...
Persistent link: https://www.econbiz.de/10010325539
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Static Hedging of Standard Options
CARR, PETER; WU, LIUREN - 2002
We consider the hedging of derivative securities when the price movement of the underlying asset can exhibit random jumps. Under a one factor Markovian setting, we derive a spanning relation between a long term option and a continuum of short term options. We then apply this spanning relation to...
Persistent link: https://www.econbiz.de/10009440737
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Asset pricing under information with stochastic volatility
Düring, Bertram - 2008
Based on a general specification of the asset speci?c pricing kernel, we develop a pricing model using an information process with stochastic volatility. We derive analytical asset and option pricing formulas. The asset prices in this rational expectations model exhibit crash-like, strong...
Persistent link: https://www.econbiz.de/10010266929
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Essays on Fine Structure of Asset Returns, Jumps, and Stochastic Volatility
Yu, Jung-Suk - 2006
) skewed tdistributioncombined with GARCH specifications can outperform mixed GARCH-jump modelssuch as Maheu and McCurdy …-time framework. I find that the moreparsimonious GJR-HT model is superior to mixed GARCH-jump models. Likelihood-ratio (LR … specifications which gives us both better fit to thedata and parsimony of parameterization. The benefits of estimating GARCH models …
Persistent link: https://www.econbiz.de/10009468629
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Financial Modeling in a Fast Mean-Reverting Stochastic Volatility Environment
Fouque, Jean-Pierre; Papanicolaou, George; Sircar, K. Ronnie - 1999
We present a derivative pricing and estimation methodology for a class of stochastic volatility models that exploits the observed 'bursty' or persistent nature of stock price volatility. Empirical analysis of high-frequency S&P 500 index data confirms that volatility reverts slowly to its mean...
Persistent link: https://www.econbiz.de/10009476731
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Essays on Fine Structure of Asset Returns, Jumps, and Stochastic Volatility
Yu, Jung-Suk - 2006
as Hansen's (1994) skewed tdistribution combined with GARCH specifications can outperform mixed GARCH-jump models such as … discrete-time framework. I find that the more parsimonious GJR-HT model is superior to mixed GARCH-jump models. Likelihood … benefits of estimating GARCH models using asymmetric leptokurtic distributions are more substantial for highly volatile series …
Persistent link: https://www.econbiz.de/10009451062