Essays In Volatility Modeling And Option Pricing
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Essays In Volatility Modeling And Option Pricing
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Author : Mathieu Fournier
language : en
Publisher:
Release Date : 2014
Essays In Volatility Modeling And Option Pricing written by Mathieu Fournier and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Essays In Volatility And Stochastic Volatility Option Pricing Models
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Author : İnanç Kırgız
language : en
Publisher:
Release Date : 2001
Essays In Volatility And Stochastic Volatility Option Pricing Models written by İnanç Kırgız and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Financial futures categories.
Essays On American Options Pricing Under Levy Models With Stochastic Volatility And Jumps
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Author : Ye Chen
language : en
Publisher:
Release Date : 2019
Essays On American Options Pricing Under Levy Models With Stochastic Volatility And Jumps written by Ye Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
In ``A Multi-demensional Transform for Pricing American Options Under Stochastic Volatility Models", we present a new transform-based approach for pricing American options under low-dimensional stochastic volatility models which can be used to construct multi-dimensional path-independent lattices for all low-dimensional stochastic volatility models given in the literature, including SV, SV2, SVJ, SV2J, and SVJ2 models. We demonstrate that the prices of European options obtained using the path-independent lattices converge rapidly to their true prices obtained using quasi-analytical solutions. Our transform-based approach is computationally more efficient than all other methods given in the literature for a large class of low-dimensional stochastic volatility models. In ``A Multi-demensional Transform for Pricing American Options Under Levy Models", We extend the multi-dimensional transform to Levy models with stochastic volatility and jumps in the underlying stock price process. Efficient path-independent tree can be constructed for both European and American options. Our path-independent lattice method can be applied to almost all Levy models in the literature, such as Merton (1976), Bates (1996, 2000, 2006), Pan (2002), the NIG model, the VG model and the CGMY model. The numerical results show that our method is extemly accurate and fast. In ``Empirical performance of Levy models for American Options", we investigate in-sample fitting and out-of-sample pricing performance on American call options under Levy models. The drawback of the BS model has been well documented in the literatures, such as negative skewness with excess kurtosis, fat tail, and non-normality. Therefore, many models have been proposed to resolve known issues associated the BS model. For example, to resolve volatility smile, local volatility, stochastic volatility, and diffusion with jumps have been considered in the literatures; to resolve non-normality, non-Markov processes have been considered, e.g., Poisson process, variance gamma process, and other type of Levy processes. One would ask: what is the gain from each of the generalized models? Or, which model is the best for option pricing? We address these problems by examining which model results in the lowest pricing error for American style contracts. For in-sample analysis, the rank (from best to worst) is Pan, CGMYsv, VGsv, Heston, CGMY, VG and BS. And for out-of-sample pricing performance, the rank (from best to worst) is CGMYsv, VGsv, Pan, Heston, BS, VG, and CGMY. Adding stochastic volatility and jump into a model improves American options pricing performance, but pure jump models are worse than the BS model in American options pricing. Our empirical results show that pure jump model are over-fitting, but not improve American options pricing when they are applied to out-of-sample data.
Essays On Derivatives Pricing Theory
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Author : Ronald C. Heynen
language : en
Publisher:
Release Date : 1995
Essays On Derivatives Pricing Theory written by Ronald C. Heynen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Business & Economics categories.
Essays On Empirical Performance Of Affine Jump Diffusion Option Pricing Models
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Author : Xiang Zhang
language : en
Publisher:
Release Date : 2012
Essays On Empirical Performance Of Affine Jump Diffusion Option Pricing Models written by Xiang Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Economic forecasting categories.
Three Essays On Investments And Time Series Econometrics
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Author : Joshua Andrew Brooks
language : en
Publisher:
Release Date : 2015
Three Essays On Investments And Time Series Econometrics written by Joshua Andrew Brooks and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Electronic dissertations categories.
This dissertation includes three essays on investments and time series econometrics. This work gives new insight into the behavior of implied marginal tax rates, implied volatility, and option pricing models. The first essay examines the movement of implied marginal tax rates. A body of research points to the existence of implied marginal tax rates that can be extracted from security or derivative prices. We use the LIBOR-based interest rate swap curve and the MSI-based interest rate swap curve to examine changes in the implied tax rate. We document multiple statistically and economically significant structural breaks in the long-run implied marginal tax rate that are not exclusively located in the financial crisis (one as recent as October, 2010). These breaks represent persistent divergence from long run averages and indicate that mean reversion models may not accurately describe the stochastic processes of implied marginal tax rates. In the second essay, I develop an asymmetric time series model of the VIX. I show that the VIX and realized volatility display significant nonlinear effects which I approximate with a smooth-transition autoregressive model. I find that under certain regimes the VIX depends almost exclusively on previous realized volatility. Under other regimes, I find that the VIX depends on both its lags and previous realized volatility. Since the VIX has become a popular hedging instrument, this finding has important implications for risk managers who elect to use the VIX and its related investment vehicles. It also has implications for the use of implied volatility in value-at-risk forecasting. The third essay presents a new model for option pricing model selection. There is a significant performativity issue intrinsic in much of the option pricing literature. Once an option-pricing model (OPM) gains widespread acceptance, volatilities tend to move so that the OPM fits well with observed prices. This often leads to systematic mispricing based purely on model results. A number of systematic issues such as volatility smile are present in OPMs. To remedy this issue, I propose a new method for ranking OPMs based on one step ahead forecasts. This model transforms the data to build a distribution of the stochastic term present in OPM. This sample distribution is then tested for normality so that OPMs can be ranked in a Bayesian-like framework by their closeness to a normal distribution.
Essays On Volatility And Risk In Financial Markets
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Author : Kwanho Kim
language : en
Publisher:
Release Date : 1993
Essays On Volatility And Risk In Financial Markets written by Kwanho Kim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Euro-dollar market categories.
Essays On The Specification Testing For Dynamic Asset Pricing Models
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Author : Jaeho Yun
language : en
Publisher:
Release Date : 2009
Essays On The Specification Testing For Dynamic Asset Pricing Models written by Jaeho Yun 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.
This dissertation consists of three essays on the subjects of specification testing on dynamic asset pricing models. In the first essay (with Yongmiao Hong), "A Simulation Test for Continuous-Time Models," we propose a simulation method to implement Hong and Li's (2005) transition density-based test for continuous-time models. The idea is to simulate a sequence of dynamic probability integral transforms, which is the key ingredient of Hong and Li's (2005) test. The proposed procedure is generally applicable whether or not the transition density of a continuous-time model has a closed form and is simple and computationally inexpensive. A Monte Carlo study shows that the proposed simulation test has very similar sizes and powers to the original Hong and Li's (2005) test. Furthermore, the performance of the simulation test is robust to the choice of the number of simulation iterations and the number of discretization steps between adjacent observations. In the second essay (with Yongmiao Hong), "A Specification Test for Stock Return Models," we propose a simulation-based specification testing method applicable to stochastic volatility models, based on Hong and Li (2005) and Johannes et al. (2008). We approximate a dynamic probability integral transform in Hong and Li' s (2005) density forecasting test, via the particle filters proposed by Johannes et al. (2008). With the proposed testing method, we conduct a comprehensive empirical study on some popular stock return models, such as the GARCH and stochastic volatility models, using the S&P 500 index returns. Our empirical analysis shows that all models are misspecified in terms of density forecast. Among models considered, however, the stochastic volatility models perform relatively well in both in- and out-of-sample. We also find that modeling the leverage effect provides a substantial improvement in the log stochastic volatility models. Our value-at-risk performance analysis results also support stochastic volatility models rather than GARCH models. In the third essay (with Yongmiao Hong), "Option Pricing and Density Forecast Performances of the Affine Jump Diffusion Models: the Role of Time-Varying Jump Risk Premia," we investigate out-of-sample option pricing and density forecast performances for the affine jump diffusion (AJD) models, using the S&P 500 stock index and the associated option contracts. In particular, we examine the role of time-varying jump risk premia in the AJD specifications. For comparison purposes, nonlinear asymmetric GARCH models are also considered. To evaluate density forecasting performances, we extend Hong and Li's (2005) specification testing method to be applicable to the famous AJD class of models, whether or not model-implied spot volatilities are available. For either case, we develop (i) the Fourier inversion of the closed-form conditional characteristic function and (ii) the Monte Carlo integration based on the particle filters proposed by Johannes et al. (2008). Our empirical analysis shows strong evidence in favor of time-varying jump risk premia in pricing cross-sectional options over time. However, for density forecasting performances, we could not find an AJD specification that successfully reconcile the dynamics implied by both time-series and options data.
Essays On Portfolio Optimization Simulation And Option Pricing
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Author : Zhibo Jia
language : en
Publisher:
Release Date : 2014
Essays On Portfolio Optimization Simulation And Option Pricing written by Zhibo Jia and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This thesis consists of three papers which cover the efficient Monte Carlo simulation in option pricing, the application of realized volatility in trading strategies and geometrical analysis of a four asset mean variance portfolio optimization problem. The first paper studies different efficient simulation methods to price options with different characters such as moneyness and maturity times. The incomplete market environments are also been considered. The second paper uses realized volatility based on high frequency data to improve the volatility trading strategy. The performance is compared with that using the implied volatility. The last paper re-examines the Markowitz's portfolio optimization problem using a general case. It also extends the problem to four assets, it describes the exact mean variance efficient fronter in the weight space and studies the frontier in the mean variance space. The thesis may serve to help our understanding of how to apply numerical and analytical methods to solve financial problems.
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.