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Persistent link: https://www.econbiz.de/10005489956
This paper analyzes empirical market utility functions and pricing kernels derived from the DAX and DAX option data for three market regimes. A consistent parametric framework of stochastic volatility is used. All empirical market utility functions show a region of risk proclivity that is...
Persistent link: https://www.econbiz.de/10005489971
We extend the definition of a convex risk measure to a conditional framework where additional information is available. We characterize these risk measures through the associated acceptance sets and prove a representation result in terms of conditional expectations. A suitable regularity...
Persistent link: https://www.econbiz.de/10005390720
Option pricing models are calibrated to market data of plain vanillas by minimization of an error functional. From the economic viewpoint, there are several possibilities to measure the error between the market and the model. These different specifications of the error give rise to different...
Persistent link: https://www.econbiz.de/10005652747
Recently, Diebold and Li (2003) obtained good forecasting results for yield curves in a reparametrized Nelson-Siegel framework. We analyze similar modeling approaches for price curves of variance swaps that serve nowadays as hedging instruments for options on realized variance. We consider the...
Persistent link: https://www.econbiz.de/10005677888
We extend the definition of a convex risk measure to a conditional framework where additional information is available. We characterize these risk measures through the associated acceptance sets and prove a representation result in terms of conditional expectations. As an example we consider the...
Persistent link: https://www.econbiz.de/10005678011
The calibration of option pricing models leads to the minimization of an error functional. We show that its usual specification as a root mean squared error implies fluctuating exotics prices and possibly wrong prices. We propose a simple and natural method to overcome these problems, illustrate...
Persistent link: https://www.econbiz.de/10005784859
Persistent link: https://www.econbiz.de/10004982650
Persistent link: https://www.econbiz.de/10005652733
High-dimensional regression problems which reveal dynamic behavior are typically analyzed by time propagation of a few number of factors. The inference on the whole system is then based on the low-dimensional time series analysis. Such highdimensional problems occur frequently in many different...
Persistent link: https://www.econbiz.de/10005677954