Showing 1 - 6 of 6
Ground-breaking recent work by Carr and Lee extends well-known results for variance swaps to arbitrary functions of realized variance, provided a zero-correlation assumption is made. We give a detailed mathematical analysis of some of their computations and work out the cases of volatility swaps...
Persistent link: https://www.econbiz.de/10005462679
<title>Abstract</title>We consider the three-factor double mean reverting (DMR) option pricing model of Gatheral [<italic>Consistent Modelling of SPX and VIX Options</italic>, 2008], a model which can be successfully calibrated to both VIX options and SPX options simultaneously. One drawback of this model is that calibration...
Persistent link: https://www.econbiz.de/10010976191
In this article, we show how to calibrate the widely used SVI parameterization of the implied volatility smile in such a way as to guarantee the absence of static arbitrage. In particular, we exhibit a large class of arbitrage-free SVI volatility surfaces with a simple closed-form...
Persistent link: https://www.econbiz.de/10010751542
Persistent link: https://www.econbiz.de/10009208291
Starting from a no-dynamic-arbitrage principle that imposes that trading costs should be non-negative on average and a simple model for the evolution of market prices, we demonstrate a relationship between the shape of the market impact function describing the average response of the market...
Persistent link: https://www.econbiz.de/10008675067
We consider optimal execution strategies for block market orders placed in a limit order book (LOB). We build on the resilience model proposed by Obizhaeva and Wang (2005) but allow for a general shape of the LOB defined via a given density function. Thus, we can allow for empirically observed...
Persistent link: https://www.econbiz.de/10008609630