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Breakthrough in Understanding Derivatives and Option Based Hedging - Marginal and Joint Probability Density Functions of Vanilla Options - True Value-at-Risk and Option Based Hedgi...
Izmailov, Alexander - 2015
• It is not widely emphasized in the literature that derivatives are complex random quantities which should, by custom, be characterized by their probability density functions. • It is understood that Black-Scholes style of derivatives pricing represents an expected value, i.e. the...
Persistent link: https://www.econbiz.de/10013032725
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Multivariate partial distribution : a new method of pricing group assets and analyzing the risk for hedging
Dai, Feng; Liu, Hui; Wang, Ying - 2005
Based on the Partial Distribution (Feng Dai, 2001), a new model to price an asset (MPA) is given. Going a step further, this paper puts forward the Multivariate Partial Distribution (MPD) for the first time. By use of MPD, we could gain a new kind of model for pricing the group assets (MPGA), in...
Persistent link: https://www.econbiz.de/10011513103
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Stochastic Volatility and Stochastic Leverage
Veraart, Almut - 2011
This paper proposes the new concept of stochastic leverage in stochastic volatility models.Stochastic leverage refers … stochastic volatility process. We provide a systematic treatment of stochastic leverage and propose to model the stochastic … tractable and allow for a direct economic interpretation. In particular, we propose two new stochastic volatility models which …
Persistent link: https://www.econbiz.de/10013134680
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Advanced Analytics for the SABR Model
Antonov, Alexandre - 2012
implemented and do not contain any numerical integration.These formulas are important in volatility surface construction and CMS …
Persistent link: https://www.econbiz.de/10013108810
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Discrete Time Stochastic Volatility
Roos, Thomas - 2017
method consists of specifying the joint distribution of the volatility and underlying at a given expiry and requires the … obtained as one-dimensional integrals. The specification of the volatility function is flexible and allows additional control …
Persistent link: https://www.econbiz.de/10012944442
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Exact Solution to CEV Model with Uncorrelated Stochastic Volatility
Antonov, Alexandre - 2014
Stochastic volatility models are widely used in interest rate modeling to match the option smiles -- the two most …, Heston-LMM and SABR-LMM respectively.In this paper we consider the CEV model with a general stochastic volatility. Assuming … that rate-volatility correlation is zero we are able to obtain an exact integral representation of the option price …
Persistent link: https://www.econbiz.de/10013059957
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Mixing SABR Models for Negative Rates
Antonov, Alexandre - 2015
In the current low-interest-rate environment, extending option models to negative rates has become an important issue. In our previous paper, we introduced the Free SABR model, which is a natural and an attractive extension to the classical SABR model. In spite of its advantages over the Shifted...
Persistent link: https://www.econbiz.de/10013016587
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Mathematical Properties of Option Pricing Under Gamma Distribution Process
Bogomolov, Andrey - 2014
A problem of risk neutral probability density function estimation for prices of risky assets is discussed when the asset pricing model uses exponential random process with independent increments. The structure of increments consists of two components: systematic drift and a random gamma...
Persistent link: https://www.econbiz.de/10013070846
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The Distribution of the Sum of Log-normal Variables and Exact Pricing of the Arithmetic Asian Options : A Simple, Explicit Formula
Alghalith, Moawia - 2020
We overcome a long-standing obstacle in statistics. In doing so, we show that the distribution of the sum of log-normal variables is log-normal. Furthermore, we offer a breakthrough result in finance. In doing so, we introduce a simple, exact and explicit formula for pricing the arithmetic Asian...
Persistent link: https://www.econbiz.de/10012847738
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Index options realized returns distributions from passive investment strategies
Dapena, José P.; Siri, Julian R. - 2015
Few papers provide research about options returns, and the few available are focused in the analysis from the perspective of the long side of the option contract, i.e. the buyer that pays the price and her expected and realized option return. The main point of our research work is to provide a...
Persistent link: https://www.econbiz.de/10011392693