Option Pricing Under Stochastic Volatility And Trading Volume

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Option Pricing Under Stochastic Volatility And Trading Volume

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Author : Sadayuki Ono
language : en
Publisher:
Release Date : 2005

Option Pricing Under Stochastic Volatility And Trading Volume written by Sadayuki Ono 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.

This paper presents a pricing formula for European options that is derived from a model in which changes in the underlying price and trading volumes are jointly determined by exogenous events. The joint determination of volume and price changes provides a crucial link between volatility of the price process and an observable variable. The model works as follows: the process of information arrival (news) is taken to be a point process that induces simultaneous jumps in price and trading volume. In addition, price has a diffusion component that corresponds to background noise, and the parameter that governs the volatility of this component is a continuously weighted average of past trading volume. This specification makes increments to the volatility process depend on the current level of volatility and news and thereby accounts for the observed persistence in volatility. Moreover, it makes volatility an observable instead of a latent variable, as it is in the usual stochastic volatility setups. Options can be priced as in the Heston framework by inverting the conditional characteristic function of underlying price at expiration. We find that the model accounts well for time varying volatility smiles and term structures and that out-of-sample price forecasts for a sample of stock options are superior not only to those of standard stochastic volatility models but even to the benchmark ad hoc procedure of plugging current implicit volatilities into the Black-Scholes formula.

Pricing And Hedging Index Options Under Stochastic Volatility

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Author : Saikat Nandi
language : en
Publisher:
Release Date : 1996

Pricing And Hedging Index Options Under Stochastic Volatility written by Saikat Nandi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with Hedging (Finance) categories.

Option Valuation Under Stochastic Volatility

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Author : Alan L. Lewis
language : en
Publisher:
Release Date : 2000

Option Valuation Under Stochastic Volatility written by Alan L. Lewis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Business & Economics categories.

Option Pricing Under Stochastic Volatility And Stochastic Interest Rate In The Spanish Case

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Author : Marc Sáez
language : en
Publisher:
Release Date : 1995

Option Pricing Under Stochastic Volatility And Stochastic Interest Rate In The Spanish Case written by Marc Sáez and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Options (Finance) categories.

Option Pricing Under Stochastic Volatility

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Author : Josep Perelló
language : en
Publisher:
Release Date : 2014

Option Pricing Under Stochastic Volatility written by Josep Perelló 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.

We study the pricing problem for a European call option when the volatility of the underlying asset is random and follows the exponential Ornstein-Uhlenbeck model. The random diffusion model proposed is a two-dimensional market process that takes a log-Brownian motion to describe price dynamics and an Ornstein-Uhlenbeck subordinated process describing the randomness of the log-volatility. We derive an approximate option price that is valid when (i) the fluctuations of the volatility are larger than its normal level, (ii) the volatility presents a slow driving force toward its normal level and, finally, (iii) the market price of risk is a linear function of the log-volatility. We study the resulting European call price and its implied volatility for a range of parameters consistent with daily Dow Jones Index data.

Option Valuation Under Stochastic Volatility Ii

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Author : Alan L. Lewis
language : en
Publisher:
Release Date : 2016-05-12

Option Valuation Under Stochastic Volatility Ii written by Alan L. Lewis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-05-12 with categories.

This book is a sequel to the author's well-received "Option Valuation under Stochastic Volatility." It extends that work to jump-diffusions and many related topics in quantitative finance. Topics include spectral theory for jump-diffusions, boundary behavior for short-term interest rate models, modelling VIX options, inference theory, discrete dividends, and more. It provides approximately 750 pages of original research in 26 chapters, with 165 illustrations, Mathematica, and some C/C++ codes. The first 12 chapters (550 pages) are completely new. Also included are reprints of selected previous publications of the author for convenient reference. The book should interest both researchers and quantitatively-oriented investors and traders. First 12 chapters: Slow Reflection, Jump-Returns, & Short-term Interest Rates Spectral Theory for Jump-diffusions Joint Time Series Modelling of SPX and VIX Modelling VIX Options (and Futures) under Stochastic Volatility Stochastic Volatility as a Hidden Markov Model Continuous-time Inference: Mathematical Methods and Worked Examples A Closer Look at the Square-root and 3/2-model A Closer Look at the SABR Model Back to Basics: An Update on the Discrete Dividend Problem PDE Numerics without the Pain Exact Solution to Double Barrier Problems under a Class of Processes Advanced Smile Asymptotics: Geometry, Geodesics, and All That

Option Pricing Under Stochastic Volatility For S P 500 And Ftse 100 Index Options

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Author : Yueh-Neng Lin
language : en
Publisher:
Release Date : 1999

Option Pricing Under Stochastic Volatility For S P 500 And Ftse 100 Index Options written by Yueh-Neng Lin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with categories.

Derivatives In Financial Markets With Stochastic Volatility

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Author : Jean-Pierre Fouque
language : en
Publisher: Cambridge University Press
Release Date : 2000-07-03

Derivatives In Financial Markets With Stochastic Volatility written by Jean-Pierre Fouque and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000-07-03 with Business & Economics categories.

This book, first published in 2000, addresses pricing and hedging derivative securities in uncertain and changing market volatility.

American Option Pricing Under Stochastic Volatility

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Author : Manisha Goswami
language : en
Publisher:
Release Date : 2008

American Option Pricing Under Stochastic Volatility written by Manisha Goswami and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.

The approximate method to price American options makes use of the fact that accurate pricing of these options does not require exact determination of the early exercise boundary. Thus, the procedure mixes the two models of constant and stochastic volatility. The idea is to obtain early exercise boundary through constant volatility model using the approximation methods of AitSahlia and Lai or Ju and then utilize this boundary to price the options under stochastic volatility models. The data on S & P 100 Index American options is used to analyze the pricing performance of the mixing of the two models. The performance is studied with respect to percentage pricing error and absolute pricing errors for each money-ness maturity group.

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.