Non Stationary Stochastic Volatility Model For Dynamic Feedback And Skewness
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Non Stationary Stochastic Volatility Model For Dynamic Feedback And Skewness
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Author : Sujay Mukhoti
language : en
Publisher:
Release Date : 2015
Non Stationary Stochastic Volatility Model For Dynamic Feedback And Skewness written by Sujay Mukhoti and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
In this paper I present a new single factor stochastic volatility model for asset return observed in discrete time and its latent volatility. This model unifies the feedback effect and return skewness using a common factor for return and its volatility. Further, it generalizes the existing stochastic volatility framework with constant feedback to one with time varying feedback and as a consequence time varying skewness follows. However, presence of dynamic feedback effect violates the weak-stationarity assumption usually considered for the latent volatility process. The concept of bounded stationarity has been proposed in this paper to address the issue of non-stationarity. A characterization of the error distributions for returns and volatility is provided on the basis of existence of conditional moments. Finally, an application of the model has been explained using S&P100 daily returns under the assumption of Normal error and half Normal common factor distribution.
A Stochastic Volatility Model With Conditional Skewness
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Author : Bruno Feunou
language : en
Publisher:
Release Date : 2011
A Stochastic Volatility Model With Conditional Skewness written by Bruno Feunou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
Stochastic Volatility Modeling
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Author : Lorenzo Bergomi
language : en
Publisher: CRC Press
Release Date : 2015-12-16
Stochastic Volatility Modeling written by Lorenzo Bergomi and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-12-16 with Business & Economics categories.
Packed with insights, Lorenzo Bergomi's Stochastic Volatility Modeling explains how stochastic volatility is used to address issues arising in the modeling of derivatives, including:Which trading issues do we tackle with stochastic volatility? How do we design models and assess their relevance? How do we tell which models are usable and when does c
A Stochastic Volatility Model With Fat Tails Skewness And Leverage Effects
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Author : Daniel R. Smith
language : en
Publisher:
Release Date : 2007
A Stochastic Volatility Model With Fat Tails Skewness And Leverage Effects written by Daniel R. Smith and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
We develop a new stochastic volatility model that captures the three most important features of stock index returns: negative correlation between returns and future volatility, excess kurtosis and negative skewness. We estimate the model parameters by maximum likelihood using a numerical integration-based filter to deal with the latent nature of volatility. In this approach different models are defined by varying the joint density of returns and future volatility conditional on current volatility. Our innovation is to construct the joint conditional density using a copula. This approach is tremendously flexible and allows the econometrician to choose the marginal distribution of both returns and volatility independently and then stitch them together using a copula, which is also chosen independently, to form the joint density. We also develop conditional moment-based model specification tests for the extent to which the various stochastic volatility models are able to capture the skewness and excess kurtosis we observe in practice. The parameter estimates and conditional moment tests indicate that leverage effects, excess kurtosis and skewness are all crucial for modeling stock returns.
Stochastic Volatility
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Author : Neil Shephard
language : en
Publisher: Oxford University Press, USA
Release Date : 2005
Stochastic Volatility written by Neil Shephard and has been published by Oxford University Press, USA this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Business & Economics categories.
Stochastic volatility is the main concept used in the fields of financial economics and mathematical finance to deal with time-varying volatility in financial markets. This work brings together some of the main papers that have influenced this field, andshows that the development of this subject has been highly multidisciplinary.
Complex Systems In Finance And Econometrics
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Author : Robert A. Meyers
language : en
Publisher: Springer Science & Business Media
Release Date : 2010-11-03
Complex Systems In Finance And Econometrics written by Robert A. Meyers and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-11-03 with Business & Economics categories.
Finance, Econometrics and System Dynamics presents an overview of the concepts and tools for analyzing complex systems in a wide range of fields. The text integrates complexity with deterministic equations and concepts from real world examples, and appeals to a broad audience.
On Moment Non Explosions For Wishart Based Stochastic Volatility Models
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Author : José Da Fonseca
language : en
Publisher:
Release Date : 2018
On Moment Non Explosions For Wishart Based Stochastic Volatility Models written by José Da Fonseca and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This paper provides a result on moment non-explosions for a stock following a Wishart multidimensional stochastic volatility dynamic or a Wishart affine stochastic correlation dynamic when the parameter values satisfy certain constraints. By reformulating the stock dynamic in terms of the volatility path along with standard results on matrix Lyapunov and Riccati equations, a non-explosion result of the moment of order greater than one can be obtained. It extends to these frameworks a property well known for the Heston model.
Stochastic Volatility And Jumps
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Author : Katja Ignatieva
language : en
Publisher:
Release Date : 2009
Stochastic Volatility And Jumps written by Katja Ignatieva 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 paper analyzes exponentially affine and non-affine stochastic volatility models with jumps in returns and volatility. Markov Chain Monte Carlo (MCMC) technique is applied within a Bayesian inference to estimate model parameters and latent variables using daily returns from the Samp;P 500 stock index. There are two approaches to overcome the problem of misspecification of the square root stochastic volatility model. The first approach proposed by Christo ersen, Jacobs and Mimouni (2008) suggests to investigate some non-affine alternatives of the volatility process. The second approach consists in examining more heavily parametrized models by adding jumps to the return and possibly to the volatility process. The aim of this paper is to combine both model frameworks and to test whether the class of affine models is outperformed by the class of non-affine models if we include jumps into the stochastic processes. We conclude that the non-affine model structure have promising statistical properties and are worth further investigations. Further, we find affine models with jump components that perform similar to the non affine models without jump components. Since non affine models yield economically unrealistic parameter estimates, and research is rather developed for the affine model structures we have a tendency to prefer the affine jump diffusion models.
Inside Volatility Arbitrage
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Author : Alireza Javaheri
language : en
Publisher: John Wiley & Sons
Release Date : 2011-08-24
Inside Volatility Arbitrage written by Alireza Javaheri and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-08-24 with Business & Economics categories.
Today?s traders want to know when volatility is a sign that the sky is falling (and they should stay out of the market), and when it is a sign of a possible trading opportunity. Inside Volatility Arbitrage can help them do this. Author and financial expert Alireza Javaheri uses the classic approach to evaluating volatility -- time series and financial econometrics -- in a way that he believes is superior to methods presently used by market participants. He also suggests that there may be "skewness" trading opportunities that can be used to trade the markets more profitably. Filled with in-depth insight and expert advice, Inside Volatility Arbitrage will help traders discover when "skewness" may present valuable trading opportunities as well as why it can be so profitable.
Stochastic Volatility Modeling
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Author : Lorenzo Bergomi
language : en
Publisher:
Release Date : 2016
Stochastic Volatility Modeling written by Lorenzo Bergomi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This is Chapter 2 of Stochastic Volatility Modeling, published by CRC/Chapman & Hall.In this chapter the local volatility model is surveyed as a market model for the underlying together with its associated vanilla options.First, relationships of implied to local volatilities are derived, as well as approximations for skew and curvature. Exact and approximate techniques for taking dividends into account are presented.We then turn to the dynamics of the local volatility model. We introduce the Skew Tickiness Ratio (SSR) and derive approximate formulas for the SSR and volatilities of volatilities in the local volatility model.We also examine future skews.We then consider the delta and carry P&L of a hedged option position. We derive the expression of the market-model delta of the local volatility model and discuss the relationship between sticky-strike and market-model deltas. We characterize the gamma/theta break-even levels of a hedged position and show that the local volatility model is indeed a market model.We then derive the expression of the vega-hedge portfolio.Markov-functional models are considered next.Finally, we survey the Uncertain Volatility Model and its usage.A digest summarizes key points.