Stochastic Volatility And The Pricing Of Financial Derivatives
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Stochastic Volatility And The Pricing Of Financial Derivatives
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Author : Antoine Petrus Cornelius van der Ploeg
language : en
Publisher: Rozenberg Publishers
Release Date : 2006
Stochastic Volatility And The Pricing Of Financial Derivatives written by Antoine Petrus Cornelius van der Ploeg and has been published by Rozenberg Publishers this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 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.
The Volatility Surface
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Author : Jim Gatheral
language : en
Publisher: John Wiley & Sons
Release Date : 2011-03-10
The Volatility Surface written by Jim Gatheral 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 2011-03-10 with Business & Economics categories.
Praise for The Volatility Surface "I'm thrilled by the appearance of Jim Gatheral's new book The Volatility Surface. The literature on stochastic volatility is vast, but difficult to penetrate and use. Gatheral's book, by contrast, is accessible and practical. It successfully charts a middle ground between specific examples and general models--achieving remarkable clarity without giving up sophistication, depth, or breadth." --Robert V. Kohn, Professor of Mathematics and Chair, Mathematical Finance Committee, Courant Institute of Mathematical Sciences, New York University "Concise yet comprehensive, equally attentive to both theory and phenomena, this book provides an unsurpassed account of the peculiarities of the implied volatility surface, its consequences for pricing and hedging, and the theories that struggle to explain it." --Emanuel Derman, author of My Life as a Quant "Jim Gatheral is the wiliest practitioner in the business. This very fine book is an outgrowth of the lecture notes prepared for one of the most popular classes at NYU's esteemed Courant Institute. The topics covered are at the forefront of research in mathematical finance and the author's treatment of them is simply the best available in this form." --Peter Carr, PhD, head of Quantitative Financial Research, Bloomberg LP Director of the Masters Program in Mathematical Finance, New York University "Jim Gatheral is an acknowledged master of advanced modeling for derivatives. In The Volatility Surface he reveals the secrets of dealing with the most important but most elusive of financial quantities, volatility." --Paul Wilmott, author and mathematician "As a teacher in the field of mathematical finance, I welcome Jim Gatheral's book as a significant development. Written by a Wall Street practitioner with extensive market and teaching experience, The Volatility Surface gives students access to a level of knowledge on derivatives which was not previously available. I strongly recommend it." --Marco Avellaneda, Director, Division of Mathematical Finance Courant Institute, New York University "Jim Gatheral could not have written a better book." --Bruno Dupire, winner of the 2006 Wilmott Cutting Edge Research Award Quantitative Research, Bloomberg LP
Emerging Financial Derivatives
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Author : Jerome Yen
language : en
Publisher: Routledge
Release Date : 2014-11-27
Emerging Financial Derivatives written by Jerome Yen and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-11-27 with Business & Economics categories.
Exotic options and structured products are two of the most popular financial products over the past ten years and will soon become very important to the emerging markets, especially China. This book first discusses the products' recent development in the world and provides comprehensive overview of the major products. The book also discusses the risks of issuing and buying such products as well as the techniques to price them and to assess the risks. Volatility is the most important factor in determining the return and risk. Therefore, significant part of the book's content discusses how we can measure the volatility by using local and stochastic volatility models — Heston Model and Dupire Model, the volatility surface, the term structure of volatility, variance swaps, and breakeven volatility. The book introduces a set of dimensions which can be used to describe structured products to help readers to classify them. It also describes the more commonly traded exotic options with details. The book discusses key features of each exotic option which can be used to develop structured products and covers their pricing models and when to issue such products that contain such exotic options. This book contains several case studies about how to use the models or techniques to price and hedge risks. These case analyses are illuminating.
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.
On The Role Of Behavioral Finance In The Pricing Of Financial Derivatives
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Author : Alonso Pena
language : en
Publisher:
Release Date : 2015
On The Role Of Behavioral Finance In The Pricing Of Financial Derivatives written by Alonso Pena 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.
The object of this study was to investigate some implications of the tenets of behavioral finance on the pricing of financial derivatives. In particular, based on the work by Wolff, et al (2009) we have investigated how prospect theory (Kahneman and Tversky, 1979) can be intregrated into the Black and Scholes (1973) option pricing framework. We have then used the resulting “behavioral version” of the Black-Scholes equation to price market quoted options. As an empirical test we have calibrated three-month market-quoted call options on the Standard & Poor's 500 index (SPX) at the Chicago Board of Options Exchange (CBOE) during the period January to December 2007. As a comparison, we have also calibrated the Heston (1993) stochastic volatility option pricing model to the same contracts. Our results show that during the period of study the market option prices are captured better by the behavioral version of the Black-Scholes equation than by the Heston stochastic volatility model. Further work is required to investigate if this is the case for other option types and under different market conditions.
Modelling And Simulation Of Stochastic Volatility In Finance
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Author : Christian Kahl
language : en
Publisher: Universal-Publishers
Release Date : 2008
Modelling And Simulation Of Stochastic Volatility In Finance written by Christian Kahl and has been published by Universal-Publishers this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Business & Economics categories.
The famous Black-Scholes model was the starting point of a new financial industry and has been a very important pillar of all options trading since. One of its core assumptions is that the volatility of the underlying asset is constant. It was realised early that one has to specify a dynamic on the volatility itself to get closer to market behaviour. There are mainly two aspects making this fact apparent. Considering historical evolution of volatility by analysing time series data one observes erratic behaviour over time. Secondly, backing out implied volatility from daily traded plain vanilla options, the volatility changes with strike. The most common realisations of this phenomenon are the implied volatility smile or skew. The natural question arises how to extend the Black-Scholes model appropriately. Within this book the concept of stochastic volatility is analysed and discussed with special regard to the numerical problems occurring either in calibrating the model to the market implied volatility surface or in the numerical simulation of the two-dimensional system of stochastic differential equations required to price non-vanilla financial derivatives. We introduce a new stochastic volatility model, the so-called Hyp-Hyp model, and use Watanabe's calculus to find an analytical approximation to the model implied volatility. Further, the class of affine diffusion models, such as Heston, is analysed in view of using the characteristic function and Fourier inversion techniques to value European derivatives.
Volatility And Correlation
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Author : Riccardo Rebonato
language : en
Publisher: John Wiley & Sons
Release Date : 2005-07-08
Volatility And Correlation written by Riccardo Rebonato 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 2005-07-08 with Business & Economics categories.
In Volatility and Correlation 2nd edition: The Perfect Hedger and the Fox, Rebonato looks at derivatives pricing from the angle of volatility and correlation. With both practical and theoretical applications, this is a thorough update of the highly successful Volatility & Correlation – with over 80% new or fully reworked material and is a must have both for practitioners and for students. The new and updated material includes a critical examination of the ‘perfect-replication’ approach to derivatives pricing, with special attention given to exotic options; a thorough analysis of the role of quadratic variation in derivatives pricing and hedging; a discussion of the informational efficiency of markets in commonly-used calibration and hedging practices. Treatment of new models including Variance Gamma, displaced diffusion, stochastic volatility for interest-rate smiles and equity/FX options. The book is split into four parts. Part I deals with a Black world without smiles, sets out the author’s ‘philosophical’ approach and covers deterministic volatility. Part II looks at smiles in equity and FX worlds. It begins with a review of relevant empirical information about smiles, and provides coverage of local-stochastic-volatility, general-stochastic-volatility, jump-diffusion and Variance-Gamma processes. Part II concludes with an important chapter that discusses if and to what extent one can dispense with an explicit specification of a model, and can directly prescribe the dynamics of the smile surface. Part III focusses on interest rates when the volatility is deterministic. Part IV extends this setting in order to account for smiles in a financially motivated and computationally tractable manner. In this final part the author deals with CEV processes, with diffusive stochastic volatility and with Markov-chain processes. Praise for the First Edition: “In this book, Dr Rebonato brings his penetrating eye to bear on option pricing and hedging.... The book is a must-read for those who already know the basics of options and are looking for an edge in applying the more sophisticated approaches that have recently been developed.” —Professor Ian Cooper, London Business School “Volatility and correlation are at the very core of all option pricing and hedging. In this book, Riccardo Rebonato presents the subject in his characteristically elegant and simple fashion...A rare combination of intellectual insight and practical common sense.” —Anthony Neuberger, London Business School
Market Practice In Financial Modelling
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Author : Chia Chiang Tan
language : en
Publisher: World Scientific Publishing Company
Release Date : 2012-07-11
Market Practice In Financial Modelling written by Chia Chiang Tan and has been published by World Scientific Publishing Company this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-07-11 with Business & Economics categories.
Written to bridge the gap between foundational quantitative finance and market practice, this book goes beyond the basics covered in most textbooks by presenting content concerning actual industry norms, thus resulting in a clearer picture of the field for the readers. These include, for instance, the practitioner's perspective of how local versus stochastic volatility affects forward smile, or the implications of mean reversion on forward volatility. Key considerations for modelling in rates, equities and foreign exchange are presented from the perspective of common themes across various assets, as well as their individual characteristics. The discussion on models emphasizes the key aspects that are relevant to the pricing of different types of financial derivatives, so that the reader can observe how an appropriate choice of models is essential in reflecting the risk profile and hedging considerations for different products. With the knowledge gleaned from this book, readers will attain a more comprehensive understanding of market practice in derivatives modelling. Foreword Foreword (246 KB)
Multiscale Stochastic Volatility For Equity Interest Rate And Credit Derivatives
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Author : Jean-Pierre Fouque
language : en
Publisher: Cambridge University Press
Release Date : 2011-09-29
Multiscale Stochastic Volatility For Equity Interest Rate And Credit Derivatives 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 2011-09-29 with Mathematics categories.
Building upon the ideas introduced in their previous book, Derivatives in Financial Markets with Stochastic Volatility, the authors study the pricing and hedging of financial derivatives under stochastic volatility in equity, interest-rate, and credit markets. They present and analyze multiscale stochastic volatility models and asymptotic approximations. These can be used in equity markets, for instance, to link the prices of path-dependent exotic instruments to market implied volatilities. The methods are also used for interest rate and credit derivatives. Other applications considered include variance-reduction techniques, portfolio optimization, forward-looking estimation of CAPM 'beta', and the Heston model and generalizations of it. 'Off-the-shelf' formulas and calibration tools are provided to ease the transition for practitioners who adopt this new method. The attention to detail and explicit presentation make this also an excellent text for a graduate course in financial and applied mathematics.