Search Results - subject:"SMILE"

Behaviour and determinants of implied volatility in Indian market

Nigam, Narander Kumar; Pandey, Piyush - In: Journal of Advances in Management Research 13 (2016) 3, pp. 271-291

option market and its relationship with moneyness (called the volatility smile). Its goal is also to ascertain the … determinants of IV. Practical implications The behaviour of the volatility smile is important when accounting for the Vega risks in … existence of the volatility smile for the index options market in India. It examines and confirms the smile’s asymmetry patterns …

Persistent link: https://www.econbiz.de/10014840158

Explaining asset pricing puzzles associated with the 1987 market crash

Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S. - 2010

The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for equity index options, despite minimal changes in aggregate consumption. We explain these events within a general equilibrium framework in which expected endowment growth and economic...

Persistent link: https://www.econbiz.de/10010292171

Why Does Bad News Increase Volatility and Decrease Leverage?

Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2010

A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second moments of asset returns. This paper suggests a reason...

Persistent link: https://www.econbiz.de/10009251219

Alpha-root Processes for Derivatives pricing

Balakrishna, BS - Volkswirtschaftliche Fakultät, … - 2010

A class of mean reverting positive stochastic processes driven by alpha-stable distributions, 1=alpha2, are discussed. They are referred to as alpha-root processes in analogy to the square root process or the Cox-Ingersoll-Ross process derived from the Brownian motion. They are affine models in...

Persistent link: https://www.econbiz.de/10008562602

Levy Subordinator Model: A Two Parameter Model of Default Dependency

Balakrishna, B S - Volkswirtschaftliche Fakultät, … - 2010

Subordinators are Levy processes with non-decreasing sample paths. They are natural processes to model default dependency. They help ensure that the loss process is non-decreasing leading to a promising class of dynamic models. The simplest subordinator is the Levy subordinator, a maximally...

Persistent link: https://www.econbiz.de/10008685034

Coarse thinking, implied volatility, and the valuation of call and put options

Siddiqi, Hammad - Volkswirtschaftliche Fakultät, … - 2010

People think by analogies and comparisons. Such way of thinking, termed coarse thinking by Mullainathan et al [Quarterly Journal of Economics, May 2008] is intuitively very appealing. We derive a new option pricing formula based on the assumption that the market consists of coarse thinkers as...

Persistent link: https://www.econbiz.de/10008530709

Stochastic Volatility

Andersen, Torben G.; Benzoni, Luca - School of Economics and Management, University of Aarhus - 2010

We give an overview of a broad class of models designed to capture stochastic volatility in financial markets, with illustrations of the scope of application of these models to practical finance problems. In a broad sense, this model class includes GARCH, but we focus on a narrower set of...

Persistent link: https://www.econbiz.de/10008504200

Why Does Bad News Increase Volatility and Decrease Leverage?

Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2010

The literature on leverage until now shows how an increase in volatility reduces leverage. However, in order to explain pro-cyclical leverage it assumes that bad news increases volatility. This paper suggests a reason why bad news is more often than not associated with higher future volatility....

Persistent link: https://www.econbiz.de/10008456246

Why Does Bad News Increase Volatility and Decrease Leverage?

Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2010

Persistent link: https://www.econbiz.de/10008828614

On cross-currency models with stochastic volatility and correlated interest rates

Grzelak, Lech; Oosterlee, Kees - Volkswirtschaftliche Fakultät, … - 2010

interest rate by a stochastic volatility displaced-diffusion Libor Market Model [AA02], which can model an interest rate smile …

Persistent link: https://www.econbiz.de/10008587838