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We propose a semiparametric factor model, which approximates the implied volatility surface (IVS) in a finite dimensional function space. Unlike standard principal component approaches typically used to reduce complexity, our approach is tailored to the degenerated design of IVS data. In...
Persistent link: https://www.econbiz.de/10010970332
A primary goal in modelling the implied volatility surface (IVS) for pricing and hedging aims at reducing complexity. For this purpose one fits the IVS each day and applies a principal component analysis using a functional norm. This approach, however, neglects the degenerated string structure...
Persistent link: https://www.econbiz.de/10003036581
A primary goal in modelling the dynamics of implied volatility surfaces (IVS) aims at reducing complexity. For this purpose one fits the IVS each day and applies a principal component analysis using a functional norm. This approach, however, neglects the degenerated string structure of the...
Persistent link: https://www.econbiz.de/10009663844
Persistent link: https://www.econbiz.de/10003518308
A primary goal in modelling the implied volatility surface (IVS) for pricing and hedging aims at reducing complexity. For this purpose one fits the IVS each day and applies a principal component analysis using a functional norm. This approach, however, neglects the degenerated string structure...
Persistent link: https://www.econbiz.de/10012966204
We propose a semiparametric factor model, which approximates the implied volatility surface (IVS) in a finite dimensional function space. Unlike standard principal component approaches typically used to reduce complexity, our approach is tailored to the degenerated design of IVS data. In...
Persistent link: https://www.econbiz.de/10012716516
Implied volatility is one of the key issues in modern quantitative finance, since plain vanilla option prices contain vital information for pricing and hedging of exotic and illiquid options. European plain vanilla options are nowadays widely traded, which results in a great amount of...
Persistent link: https://www.econbiz.de/10005862106
The pricing accuracy and pricing performance of local volatility models cruciallydepends on absence of arbitrage in the implied volatility surface: an input impliedvolatility surface that is not arbitrage-free invariably results in negative transitionprobabilities and/ or negative local...
Persistent link: https://www.econbiz.de/10005862109
High-dimensional regression problems which reveal dynamic behavior are typicallyanalyzed by time propagation of a few number of factors. The inference on thewhole system is then based on the low-dimensional time series analysis. Such highdimensional problems occur frequently in many different...
Persistent link: https://www.econbiz.de/10005861034
Predicting default probabilities is important for firms and banks to operate successfully and to estimate their specific risks. There are many reasons to use nonlinear techniques for predicting bankruptcy from financial ratios. Here we propose the so called Support Vector Machine (SVM) to...
Persistent link: https://www.econbiz.de/10005861245