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Pricing American Options Under High-Dimensional Models with Recursive Adaptive Sparse Expectations

Scheidegger, Simon - 2018

We introduce a novel numerical framework for pricing American options in high dimensions. Our scheme manages to alleviate the problem of dimension scaling through the use of adaptive sparse grids. We approximate the value function with a low number of points and recursively apply fast...

Persistent link: https://www.econbiz.de/10012935252

A stochastic volatility libor model and its robust calibration

Belomestny, Denis (contributor); … - 2007

In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration prodecure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to...

Persistent link: https://www.econbiz.de/10003635097

Conditional density models for asset pricing

Filipović, Damir; Hughston, Lane P.; Macrina, Andrea - 2010

We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the asset is driven by Brownian motion, an associated "master...

Persistent link: https://www.econbiz.de/10008797695

Implied volatility at expiration

Medvedev, Alexey N. - 2008

The main result of the paper is a formula for zero time-to-maturity limit of implied volatilities of European options under a broad class of stochastic volatility models. Based on this formula, we propose a closed-form approximation of the implied volatility smile. Numerical examples suggest...

Persistent link: https://www.econbiz.de/10003961401

A diffusion approximation for the riskless profit under selling of discrete time call options : non-identically distributed jumps

Nagaev, Alexander V.; Nagaev, Sergei A.; Kunst, Robert M. - 2005

A discrete time model of financial markets is considered. It is assumed that the relative jumps of the risky security price are independent non-identically distributed random variables. In the focus of attention is the expected non-risky profit of the investor that arises when the jumps of the...

Persistent link: https://www.econbiz.de/10009728974

A diffusion approximation for the riskless profit under selling of discrete time call options : non-identically distributed jumps

Nagaev, Alexander V.; Nagaev, Sergei A.; Kunst, Robert M. - 2005

Persistent link: https://www.econbiz.de/10002569872

Investor Sentiments, Rational Beliefs and Option Prices

Andreou, Panayiotis C. - 2014

This paper explores the impact of investor sentiment on the risk-neutral skewness of S&P 500 index options over the period 1990 to 2011. We decompose the aggregate investor sentiment into an economic fundamentals component that captures investors' rational updating of beliefs and an error in...

Persistent link: https://www.econbiz.de/10013050462

The Shape of the Pricing Kernel and Expected Option Returns

Schlag, Christian; Sichert, Tobias - 2021

A growing literature analyzes the cross-section of single stock option returns, virtually always under the (implicit or explicit) assumption of a monotonically decreasing pricing kernel. Using option returns, we non-parametrically provide significant and robust evidence that the pricing kernel...

Persistent link: https://www.econbiz.de/10013239311

Stock Price Fluctuations in an Agent-Based Model with Market Liquidity

Kato, Takashi - 2013

We study an agent-based stock market model with heterogeneous agents and friction. Our model is based on that of Foellmer-Schweizer(1993): The process of a stock price in a discrete-time framework is determined by temporary equilibria via agents' excess demand functions, and the diffusion...

Persistent link: https://www.econbiz.de/10013087756

Dynamic trading and asset prices : Keynes vs. Hayek

Cespa, Giovanni; Vives, Xavier - 2009

We investigate the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing … only if traders over- (under-) rely on public information with respect to optimal statistical weights. Both phenomena, in … uncertainty, over-reliance on public information obtains if noise trade displays low persistence. This defines a Keynesianʺ region …

Persistent link: https://www.econbiz.de/10003897551