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Author: Christophe Chorro
Publisher: Springer
ISBN: 3662450372
Category : Business & Economics
Languages : en
Pages : 202
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Book Description
The current world financial scene indicates at an intertwined and interdependent relationship between financial market activity and economic health. This book explains how the economic messages delivered by the dynamic evolution of financial asset returns are strongly related to option prices. The Black Scholes framework is introduced and by underlining its shortcomings, an alternative approach is presented that has emerged over the past ten years of academic research, an approach that is much more grounded on a realistic statistical analysis of data rather than on ad hoc tractable continuous time option pricing models. The reader then learns what it takes to understand and implement these option pricing models based on time series analysis in a self-contained way. The discussion covers modeling choices available to the quantitative analyst, as well as the tools to decide upon a particular model based on the historical datasets of financial returns. The reader is then guided into numerical deduction of option prices from these models and illustrations with real examples are used to reflect the accuracy of the approach using datasets of options on equity indices.
Author: Christophe Chorro
Publisher: Springer
ISBN: 3662450372
Category : Business & Economics
Languages : en
Pages : 202
Get Book Here
Book Description
The current world financial scene indicates at an intertwined and interdependent relationship between financial market activity and economic health. This book explains how the economic messages delivered by the dynamic evolution of financial asset returns are strongly related to option prices. The Black Scholes framework is introduced and by underlining its shortcomings, an alternative approach is presented that has emerged over the past ten years of academic research, an approach that is much more grounded on a realistic statistical analysis of data rather than on ad hoc tractable continuous time option pricing models. The reader then learns what it takes to understand and implement these option pricing models based on time series analysis in a self-contained way. The discussion covers modeling choices available to the quantitative analyst, as well as the tools to decide upon a particular model based on the historical datasets of financial returns. The reader is then guided into numerical deduction of option prices from these models and illustrations with real examples are used to reflect the accuracy of the approach using datasets of options on equity indices.
Author: Gopinath Kallianpur
Publisher: Springer Science & Business Media
ISBN: 1461205115
Category : Mathematics
Languages : en
Pages : 266
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Book Description
Since the appearance of seminal works by R. Merton, and F. Black and M. Scholes, stochastic processes have assumed an increasingly important role in the development of the mathematical theory of finance. This work examines, in some detail, that part of stochastic finance pertaining to option pricing theory. Thus the exposition is confined to areas of stochastic finance that are relevant to the theory, omitting such topics as futures and term-structure. This self-contained work begins with five introductory chapters on stochastic analysis, making it accessible to readers with little or no prior knowledge of stochastic processes or stochastic analysis. These chapters cover the essentials of Ito's theory of stochastic integration, integration with respect to semimartingales, Girsanov's Theorem, and a brief introduction to stochastic differential equations. Subsequent chapters treat more specialized topics, including option pricing in discrete time, continuous time trading, arbitrage, complete markets, European options (Black and Scholes Theory), American options, Russian options, discrete approximations, and asset pricing with stochastic volatility. In several chapters, new results are presented. A unique feature of the book is its emphasis on arbitrage, in particular, the relationship between arbitrage and equivalent martingale measures (EMM), and the derivation of necessary and sufficient conditions for no arbitrage (NA). {\it Introduction to Option Pricing Theory} is intended for students and researchers in statistics, applied mathematics, business, or economics, who have a background in measure theory and have completed probability theory at the intermediate level. The work lends itself to self-study, as well as to a one-semester course at the graduate level.
Author: Stefano M. Iacus
Publisher: John Wiley & Sons
ISBN: 1119990203
Category : Business & Economics
Languages : en
Pages : 402
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Book Description
Presents inference and simulation of stochastic process in the field of model calibration for financial times series modelled by continuous time processes and numerical option pricing. Introduces the bases of probability theory and goes on to explain how to model financial times series with continuous models, how to calibrate them from discrete data and further covers option pricing with one or more underlying assets based on these models. Analysis and implementation of models goes beyond the standard Black and Scholes framework and includes Markov switching models, Lévy models and other models with jumps (e.g. the telegraph process); Topics other than option pricing include: volatility and covariation estimation, change point analysis, asymptotic expansion and classification of financial time series from a statistical viewpoint. The book features problems with solutions and examples. All the examples and R code are available as an additional R package, therefore all the examples can be reproduced.
Author: Gilles Zumbach
Publisher: Springer Science & Business Media
ISBN: 3642317421
Category : Mathematics
Languages : en
Pages : 326
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Book Description
Most financial and investment decisions are based on considerations of possible future changes and require forecasts on the evolution of the financial world. Time series and processes are the natural tools for describing the dynamic behavior of financial data, leading to the required forecasts. This book presents a survey of the empirical properties of financial time series, their descriptions by means of mathematical processes, and some implications for important financial applications used in many areas like risk evaluation, option pricing or portfolio construction. The statistical tools used to extract information from raw data are introduced. Extensive multiscale empirical statistics provide a solid benchmark of stylized facts (heteroskedasticity, long memory, fat-tails, leverage...), in order to assess various mathematical structures that can capture the observed regularities. The author introduces a broad range of processes and evaluates them systematically against the benchmark, summarizing the successes and limitations of these models from an empirical point of view. The outcome is that only multiscale ARCH processes with long memory, discrete multiplicative structures and non-normal innovations are able to capture correctly the empirical properties. In particular, only a discrete time series framework allows to capture all the stylized facts in a process, whereas the stochastic calculus used in the continuum limit is too constraining. The present volume offers various applications and extensions for this class of processes including high-frequency volatility estimators, market risk evaluation, covariance estimation and multivariate extensions of the processes. The book discusses many practical implications and is addressed to practitioners and quants in the financial industry, as well as to academics, including graduate (Master or PhD level) students. The prerequisites are basic statistics and some elementary financial mathematics.
Author: Pierre Henry-Labordere
Publisher: CRC Press
ISBN: 1420087002
Category : Business & Economics
Languages : en
Pages : 403
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Book Description
Analysis, Geometry, and Modeling in Finance: Advanced Methods in Option Pricing is the first book that applies advanced analytical and geometrical methods used in physics and mathematics to the financial field. It even obtains new results when only approximate and partial solutions were previously available.Through the problem of option pricing, th
Author: Ling Chen
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The traditional Black-Scholes theory on pricing and hedging of European call options has long been criticized for its oversimplified and unrealistic model assumptions. This dissertation investigates several existing modifications and extensions of the Black-Scholes model and proposes new data-driven approaches to both option pricing and hedging for real data. The semiparametric pricing approach initially proposed by Lai and Wong (2004) provides a first attempt to bridge the gap between model and market option prices. However, its application to the S & P 500 futures options is not a success, when the original additive regression splines are used for the nonparametric part of the pricing formula. Having found a strong autocorrelation in the time-series of the Black-Scholes pricing residuals, we propose a lag-1 correction for the Black-Scholes price, which essentially is a time-series modeling of the nonparametric part in the semiparametric approach. This simple but efficient time-series approach gives an outstanding pricing performance for S & P 500 futures options, even compared with the commonly practiced and favored implied volatility approaches. A major type of approaches to option hedging with proportional transaction costs is based on singular stochastic control problems that seek an optimal balance between the cost and the risk of hedging an option. We propose a data-driven rule-based strategy to connect the theoretical approaches with real-world applications. Similar to the optimal strategies in theory, the rule-based strategy can be characterized by a pair of buy/sell boundaries and a no-transaction region in between. A two-stage iterative procedure is provided for tuning the boundaries to a long period of option data. Comparing the rule-based strategy with several other existing hedging strategies, we obtain favorable results in both the simulation studies and the empirical study using the S & P 500 futures and futures options. Making use of a reverting pattern of the S & P 500 futures price, we refine the rule-based strategy by allowing hedging suspension at large jumps in futures price.
Author: Manh Thanh Le
Publisher: Springer
ISBN: 3642121454
Category : Computers
Languages : en
Pages : 499
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Book Description
The 2010 Asian Conference on Intelligent Information and Database Systems (ACIIDS) was the second event of the series of international scientific conferences for research and applications in the field of intelligent information and database systems. The aim of ACIIDS 2010 was to provide an international forum for scientific research in the technologies and applications of intelligent information, database systems and their applications. ACIIDS 2010 was co-organized by Hue University (Vietnam) and Wroclaw University of Technology (Poland) and took place in Hue city (Vietnam) during March 24–26, 2010. We received almost 330 papers from 35 countries. Each paper was peer reviewed by at least two members of the International Program Committee and International Reviewer Board. Only 96 best papers were selected for oral presentation and publi- tion in the two volumes of the ACIIDS 2010 proceedings. The papers included in the proceedings cover the following topics: artificial social systems, case studies and reports on deployments, collaborative learning, collaborative systems and applications, data warehousing and data mining, database management technologies, database models and query languages, database security and integrity,- business, e-commerce, e-finance, e-learning systems, information modeling and - quirements engineering, information retrieval systems, intelligent agents and mul- agent systems, intelligent information systems, intelligent internet systems, intelligent optimization techniques, object-relational DBMS, ontologies and information sharing, semi-structured and XML database systems, unified modeling language and unified processes, Web services and Semantic Web, computer networks and communication systems.
Author: Ching-Zong Wei
Publisher: IMS
ISBN: 9780940600683
Category : Mathematics
Languages : en
Pages : 314
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Book Description
Author: Witold Pedrycz
Publisher: Springer Science & Business Media
ISBN: 3642198201
Category : Technology & Engineering
Languages : en
Pages : 308
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Book Description
Information granules are fundamental conceptual entities facilitating perception of complex phenomena and contributing to the enhancement of human centricity in intelligent systems. The formal frameworks of information granules and information granulation comprise fuzzy sets, interval analysis, probability, rough sets, and shadowed sets, to name only a few representatives. Among current developments of Granular Computing, interesting options concern information granules of higher order and of higher type. The higher order information granularity is concerned with an effective formation of information granules over the space being originally constructed by information granules of lower order. This construct is directly associated with the concept of hierarchy of systems composed of successive processing layers characterized by the increasing levels of abstraction. This idea of layered, hierarchical realization of models of complex systems has gained a significant level of visibility in fuzzy modeling with the well-established concept of hierarchical fuzzy models where one strives to achieve a sound tradeoff between accuracy and a level of detail captured by the model and its level of interpretability. Higher type information granules emerge when the information granules themselves cannot be fully characterized in a purely numerical fashion but instead it becomes convenient to exploit their realization in the form of other types of information granules such as type-2 fuzzy sets, interval-valued fuzzy sets, or probabilistic fuzzy sets. Higher order and higher type of information granules constitute the focus of the studies on Granular Computing presented in this study. The book elaborates on sound methodologies of Granular Computing, algorithmic pursuits and an array of diverse applications and case studies in environmental studies, option price forecasting, and power engineering.
Author: Stephen J. Taylor
Publisher: World Scientific
ISBN: 9812770844
Category : Business & Economics
Languages : en
Pages : 297
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Book Description
This book contains several innovative models for the prices of financial assets. First published in 1986, it is a classic text in the area of financial econometrics. It presents ARCH and stochastic volatility models that are often used and cited in academic research and are applied by quantitative analysts in many banks. Another often-cited contribution of the first edition is the documentation of statistical characteristics of financial returns, which are referred to as stylized facts.This second edition takes into account the remarkable progress made by empirical researchers during the past two decades from 1986 to 2006. In the new Preface, the author summarizes this progress in two key areas: firstly, measuring, modelling and forecasting volatility; and secondly, detecting and exploiting price trends.