Assessing The Quality Of Volatility Estimators Via Option Pricing

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Assessing The Quality Of Volatility Estimators Via Option Pricing

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Author : Simona Sanfelici
language : en
Publisher:
Release Date : 2013

Assessing The Quality Of Volatility Estimators Via Option Pricing written by Simona Sanfelici and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.

The aim of this paper is to measure and assess the accuracy of different volatility estimators based on high frequency data in an option pricing context. For this, we use a discrete-time stochastic volatility model based on Auto-Regressive-Gamma (ARG) dynamics for the volatility.First, ARG processes are presented both under historical and risk-neutral measure, in an affine stochastic discount factor framework. The model parameters are estimated exploiting the informative content of historical high frequency data. Secondly, option pricing is performed via Monte Carlo techniques. This framework allows us to measure the quality of different volatility estimators in terms of mispricing with respect to real option data, leaving to the ARG volatility model the role of a tool. Our analysis points out that using high frequency intra-day returns allows to obtain more accurate ex post estimation of the true (unobservable) return variation than do the more traditional sample variances based on daily returns, and this is reflected in the quality of pricing. Moreover, estimators robust to microstructure effects show an improvement over the realized volatility estimator. The empirical analysis is conducted on European options written on S&P500 index.

Volatility Estimation Techniques In The Pricing Of Derivative Contracts

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Author : Emilie Drop
language : en
Publisher:
Release Date : 2017

Volatility Estimation Techniques In The Pricing Of Derivative Contracts written by Emilie Drop and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.

The aim of this paper is to evaluate how different volatility estimation techniques impact the quality of pricing option contracts. The theoretical part explains option pricing, qualitative and quantitative parameters of the Black Scholes model, and implied volatility features. The pricing performance of the Black Scholes model with historical volatilities and of the ad hoc Black Scholes model with implied volatilities are assessed with Matlab, using a real option dataset consisting of S & P 500 call options. Moreover, the specification of the regression structure used in the ad hoc Black Scholes model to estimate volatility is analysed. It is shown that the absolute smile regression structure using strike price, time to maturity and their com- bination as independent variables for one-day ahead out of sample pricing is the most accurate technique for pricing options out of all the methods considered.

Estimating Volatility Levels For Option Pricing

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Author :
language : en
Publisher:
Release Date : 1997

Estimating Volatility Levels For Option Pricing written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with categories.

Improving Volatility Estimation And Options Hedging

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Author :
language : en
Publisher:
Release Date : 2001

Improving Volatility Estimation And Options Hedging written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.

Volatility

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Author : Robert A. Jarrow
language : en
Publisher:
Release Date : 1998

Volatility written by Robert A. Jarrow and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Derivative securities categories.

Written by a number of authors, this text is aimed at market practitioners and applies the latest stochastic volatility research findings to the analysis of stock prices. It includes commentary and analysis based on real-life situations.

Estimating Volatility And Dividend Yield When Valuing Real Options To Invest Or Abandon

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Author : Graham A. Davis
language : en
Publisher:
Release Date : 1998

Estimating Volatility And Dividend Yield When Valuing Real Options To Invest Or Abandon written by Graham A. Davis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.

The opportunity to invest in or abandon a project can in principle be valued using real options techniques. In practice, option pricing has as inputs the volatility and dividend yield of the project, which are in most cases not observable via market data. Current methods of estimating these parameters are largely ad hoc, introducing potential error into the valuation process. This paper uses simple production models to formalize concepts for estimating project volatility and dividend yield in single stochastic variable option models, and provides an example of how these estimates can be used in a real option valuation exercise.

Volatility Estimation And Option Pricing

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Author : Jian Zou
language : en
Publisher:
Release Date : 2009

Volatility Estimation And Option Pricing written by Jian Zou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.

Four Essays In Volatility Estimation And Option Pricing

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Author : 束景虹
language : en
Publisher:
Release Date : 2002

Four Essays In Volatility Estimation And Option Pricing written by 束景虹 and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Options (Finance) categories.

Estimating The Volatility In Traditional Option Valuation Models

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Author : Tetsuji Takeuchi
language : en
Publisher:
Release Date : 1993

Estimating The Volatility In Traditional Option Valuation Models written by Tetsuji Takeuchi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with categories.

Volatility Estimation And Option Pricing With Fractional Brownian Motion

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Author : Daniel O. Cajueiro
language : en
Publisher:
Release Date : 2005

Volatility Estimation And Option Pricing With Fractional Brownian Motion written by Daniel O. Cajueiro and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.

We study the estimation of volatility using the Fractional Brownian Motion (FBM) to model asset returns. Then, we price some European options using a Black-Scholes type formula derived for the FBM market model.