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discrete-time stochastic volatility models having two measurement equations relating both observed returns and realized …Based on the fact that realized measures of volatility are affected by measurement errors, we introduce a new family of … realized measures in inflating the latent volatility persistence - the crucial parameter in pricing Standard and Poor's 500 …
Persistent link: https://www.econbiz.de/10012903114
jointly accounts for stock returns as well as prices of equity and volatility options. Finally, we provide numerical results …Derivatives, especially equity and volatility options, contain valuable and oftentimes essential information for … estimating stochastic volatility models. Absent strong assumptions, their typically highly nonlinear pricing dependence on the …
Persistent link: https://www.econbiz.de/10013251661
capturing jump contagion for risk management, option pricing, and scenario analysis. …
Persistent link: https://www.econbiz.de/10012650140
frequent convert between cryptocurrency and fiat currency. However, research on fair pricing and hedging for the inverse BTC … option still needs to be completed. In this paper, we conduct dynamic hedging of the inverse BTC options under the Black …-Scholes model and the Heston stochastic volatility (SV) model. In addition, we provide novel formulae of Delta, Gamma, and Vega …
Persistent link: https://www.econbiz.de/10014235955
This paper discusses risk-minimizing hedging strategies under affine GARCH models driven by Gaussian innovations. First … first-order Taylor expansion, we relate our hedging strategy to delta hedging and specify an approximation of our formula in … underlying GARCH model, and link it to minimum variance delta hedges in the continuous-time stochastic volatility literature …
Persistent link: https://www.econbiz.de/10012847163
rainfall risk than the rainfall bonds and the capital requirement for an effective hedging of the rainfall insurance portfolio …Securitization of the rainfall risk involves pooling of the rainfall contingent insurance policies to issue financial … instruments in the capital markets to transfer the rainfall risk from the insurers to the investors. Low income households …
Persistent link: https://www.econbiz.de/10012969306
such risk neutral probability. Given a well-interpolated volatility surface from market data, the risk neutral probability …The risk neutral measure is identified as a symmetric location-scale family of distribution in the local regime of the … λ model. A partial differential equation is derived as the transformation between the implied volatility surface and …
Persistent link: https://www.econbiz.de/10012964581
This paper provides a number of relevant guidelines to build a consistent Volatility Smile accounting for the FX market … Quadratic Polynomial. In addition, the Risk Neutral Density is estimated with the first two models. It is shown that not … risk management, portfolio selection, and financial event studies …
Persistent link: https://www.econbiz.de/10012967622
.We consider the setting where both the implied volatility and the risk free rate are calculated jointly from the observed option …This paper suggests a method of estimation of the implied volatility smile uncertainty of the observed options prices … due to future risk-free rate uncertainty. The purpose is to quantify the range of uncertainty under different scenarios …
Persistent link: https://www.econbiz.de/10013063582
We propose a non-structural method to retrieve the risk-neutral density (RND) impliedby options on the CBOE Volatility … options, we retrieve the variance swap term structure, the timeseries of VVIX, the VIX risk-neutral moments and the Volatility-at-Risk …
Persistent link: https://www.econbiz.de/10012934336