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compare their pricing and hedging characteristics. Then we discuss the useful applications of currency protected “quanto …” direct and inverse options for fiat-based traders and describe their pricing and hedging characteristics, all in the Black …
Persistent link: https://www.econbiz.de/10014244777
options under low-dimensional stochastic volatility models. We derive multidimensional transforms which allow us to construct … efficient path-independent lattices for virtually all low-dimensional stochastic volatility models given in the literature … including one volatility factor-based stochastic volatility (SV) models, two volatility factors-based SV models, stochastic …
Persistent link: https://www.econbiz.de/10013152949
-of-the-money and long-maturity options. When applied to Heston's stochastic volatility model, our method is shown to be extremely …
Persistent link: https://www.econbiz.de/10013116742
's stochastic volatility model, our method is shown to be extremely efficient and fairly accurate …
Persistent link: https://www.econbiz.de/10013142421
The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility … more compatible with the related concept of corridor implied volatility (CIV). We provide a comprehensive derivation of the … CIV measure and relate it to MFIV under general assumptions. In addition, we price the various volatility contracts, and …
Persistent link: https://www.econbiz.de/10014047423
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 … particular) many results for the spot implied volatility smile.In passing we (i) show that the forward-start date has to be …
Persistent link: https://www.econbiz.de/10013036196
general local-stochastic volatility model with zero correlation. We do this using the Freidlin-Wentzell theory of large …-time asymptotic behaviour for call options using Holder's inequality, and the implied volatility. This avoids the use of possibly non …, which is analysed at length in Busca et al. We also derive a series expansion for the implied volatility in the small …
Persistent link: https://www.econbiz.de/10013116586
In this paper we prove an approximate formula expressed in terms of elementary functions for the implied volatility in … implied volatility function. The proof is based on saddlepoint methods and classical properties of holomorphic functions …
Persistent link: https://www.econbiz.de/10013116644
implied index value and implied volatility whereas the restricted model only solves the implied volatility. Next, this study … for calls. Volatility for calls has no significant effect on the index pricing error. The path-dependent effect on index …
Persistent link: https://www.econbiz.de/10013123061
This paper considers the problem of European option pricing in the presence of proportional transaction costs when the price of the underlying follows a jump diffusion process. Using an approach that is based on maximization of the expected utility of terminal wealth, we transform the option...
Persistent link: https://www.econbiz.de/10013100960