This paper uses information on VIX to improve the empirical performance of GARCH models for pricing options on the S&P 500. In pricing multiple cross-sections of options, the models’ performance can clearly be improved by extracting daily spot volatilities from the series of VIX rather than by...

This article examines the differences between various Generalized Autoregressive Conditional Heteroscedastics (GARCH) models in pricing exotic options, given that the models have been calibrated on the same data sets using information on both returns and plain vanilla options. We focused on four...

This paper compares two distributed computing environments when used to price financial contingent claims with Monte Carlo methods: a PC grid and a scientific computing Linux cluster. The paper also investigates the performances for different distributing strategies. On the basis of our...

According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations under the volatility feedback effect by modeling the joint...

This study examines how calibrated stochastic volatility models maintain their option pricing performance over subsequent days. Specifically, using a number of sets of single and multi-day data, different loss functions, and regularization techniques, we examine the dynamics of the pricing...

Duration requires active monitoring because it is sensitive to the yield, resulting in duration drift. Duration drift determines the portfolio's exposure to rate changes, and hence it can be used as a measure of immunisation risk. However, research has barely focused on the properties of...

This paper compares two distributed computing environments when used to price financial contingent claims with Monte Carlo methods: a PC grid and a scientific computing Linux cluster. The paper also investigates the performances for different distributing strategies. On the basis of our...

According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price–dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations under the volatility feedback effect by modeling the...

The geometric Brownian motion is routinely used as a dynamic model of underlying project value in real option analysis, perhaps for reasons of analytic tractability. By characterizing a stochastic state variable of future cash flows, this paper considers how transformations between a state...