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Hagan, Patrick; Woodward, Diana - In: Applied Mathematical Finance 6 (1999) 3, pp. 147-157

We consider European calls and puts on an asset whose forward price F(t) obeys dF(t)=α(t)A(F)dW(t,) under the forward measure. By using singular perturbation techniques, we obtain explicit algebraic formulas for the implied volatility σB in terms of today's forward price F0 ≡ F(0), the...

Persistent link: https://www.econbiz.de/10005495434

An Improved Estimator For Black-Scholes-Merton Implied Volatility

Hallerbach, W.G.P.M. - Erasmus Research Institute of Management (ERIM), ERIM … - 2004

We derive an estimator for Black-Scholes-Merton implied volatility that, when compared to the familiar Corrado & Miller [JBaF, 1996] estimator, has substantially higher approximation accuracy and extends over a wider region of moneyness.

Persistent link: https://www.econbiz.de/10005450996

The Role of Implied Volatility in Forecasting Future Realized Volatility and Jumps in Foreign Exchange, Stock, and Bond Markets

Busch, Thomas; Christensen, Bent Jesper; Nielsen, … - Economics Department, Queen's University - 2008

, predictable, and options appear calibrated to incorporate information about future jumps in all three markets. …

Persistent link: https://www.econbiz.de/10004979472

Relative Pricing of Options with Stochastic Volatility

Ledoit, Olivier; Santa-Clara, Pedro; Yan, Shu - Anderson Graduate School of Management, University of … - 2002

This paper offers a new approach for pricing options on assets with stochastic volatility. We start by taking as given … the prices of a few simple, liquid European options. More specifically, we take as given the â€œsurfaceâ€ of Black …-Scholes implied volatilities for European options with varying strike prices and maturities. We show that the Black-Scholes implied …

Persistent link: https://www.econbiz.de/10011130362

Macroeconomic information and implied volatility: evidence from Australian index options

Tanha, Hassan; Dempsey, Michael; Hallahan, Terrence - In: Review of Behavioral Finance 6 (2014) September, pp. 46-62

options to examine the response of option IV, as well as higher moments of the underlying return distribution, to … options. Findings –The findings suggest that in-the-money and out-of-the money options have difference characteristics in …

Persistent link: https://www.econbiz.de/10010895044

Monitoring Financial Distress in a High-Stress Financial World: The Role of Option Prices as Bank Risk Metrics

Coffinet, Jérôme; Pop, Adrian; Tiesset, Muriel - In: Journal of Financial Services Research 44 (2013) 3, pp. 229-257

The current financial crisis offers a unique opportunity to investigate the leading properties of market indicators in a stressed environment and their usefulness from a banking supervision perspective. One pool of relevant information that has been little explored in the empirical literature is...

Persistent link: https://www.econbiz.de/10010863572

Alternative Formulas to Compute Implied Standard Deviation

Ang, James S.; Jou, Gwoduan David; Lai, Tsong-Yue - In: Review of Pacific Basin Financial Markets and Policies … 12 (2009) 02, pp. 159-176

value of the exercise price. Extension of the second formula's approach to third options value derives the third formula. A …

Persistent link: https://www.econbiz.de/10004964026

The Role of Implied Volatility in Forecasting Future Realized Volatility and Jumps in Foreign Exchange, Stock, and Bond Markets

Busch, Thomas; Christensen, Bent Jesper; Nielsen, … - School of Economics and Management, University of Aarhus - 2007

, predictable, and options appear calibrated to incorporate information about future jumps in all three markets. …

Persistent link: https://www.econbiz.de/10005004428

The Implied-Realized Volatility Relation with Jumps in Underlying Asset Prices

Christensen, Bent Jesper; Nielsen, Morten Ørregaard - Economics Department, Queen's University - 2005

Recent developments allow a nonparametric separation of the continuous sample path component and the jump component of realized volatility. The jump component has very different time series properties than the continuous component, and accounting for this allows improved forecasting of future...

Persistent link: https://www.econbiz.de/10005688501

Stochastic Volatility

Andersen, Torben G.; Benzoni, Luca - School of Economics and Management, University of Aarhus - 2010

We give an overview of a broad class of models designed to capture stochastic volatility in financial markets, with illustrations of the scope of application of these models to practical finance problems. In a broad sense, this model class includes GARCH, but we focus on a narrower set of...

Persistent link: https://www.econbiz.de/10008504200