An Empirical Analysis of Jump Diffusion Stochastic Volatility Models for Currency Option Pricing PDF Download
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Author: Lei Zhang
Publisher:
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Category :
Languages : en
Pages :
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Author: Lei Zhang
Publisher:
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Category :
Languages : en
Pages :
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Author: Xiang Zhang
Publisher:
ISBN:
Category : Economic forecasting
Languages : en
Pages : 612
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Author: Abdelilah Jraifi
Publisher: LAP Lambert Academic Publishing
ISBN: 9783659564895
Category :
Languages : en
Pages : 104
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In the modern economic world, the options contracts are used because they allow to hedge against the vagaries and risks refers to fluctuations in the prices of the underlying assets. The determination of the price of these contracts is of great importance for investors.We are interested in problems of options pricing, actually the European and Quanto options on a financial asset. The price of that asset is modeled by a multi-dimentional jump diffusion with stochastic volatility. Otherwise, the first model considers the volatility as a continuous process and the second model considers it as a jump process. Finally in the 3rd model, the underlying asset is without jump and volatility follows a model CEV without jump. This model allow better to take into account some phenomena observed in the markets. We develop numerical methods that determine the values of prices for these options. We first write the model as an integro-differential stochastic equations system "EIDS," of which we study existence and unicity of solutions. Then we relate the resolution of PIDE to the computation of the option value.
Author: David S. Bates
Publisher:
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Category : Foreign exchange
Languages : en
Pages : 72
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An efficient method is developed for pricing American options on combination stochastic volatility/jump-diffusion processes when jump risk and volatility risk are systematic and nondiversifiable, thereby nesting two major option pricing models. The parameters implicit in PHLX-traded Deutschemark options of the stochastic volatility/jump- diffusion model and various submodels are estimated over 1984-91, and are tested for consistency with the $/DM futures process and the implicit volatility sample path. The parameters implicit in options are found to be inconsistent with the time series properties of implicit volatilities, but qualitatively consistent with log- differenced futures prices. No economically significant implicit expectations of exchange rate jumps were found in full-sample estimation, which is consistent with the reduced leptokurtosis of $/DM weekly exchange rate changes over 1984-91 relative to earlier periods.
Author: Sofiane Aboura
Publisher:
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Category :
Languages : en
Pages :
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The mispricing of the deep-in-the money and deep-out-the-money generated by the Black-Scholes (1973) model is now well documented in the literature. In this paper, we discuss different option valuation models on the basis of empirical tests carry out on the French option market. We examine methods that account for non-normal skewness and kurtosis, relax the martingale restriction, mix two log-normal distributions, and allows either for jump diffusion process or for stochastic volatility. We find that the use of a jump diffusion and stochastic volatility model performs as well as the inclusion of non normal skewness and kurtosis in terms of precision in the option valuation.Keywords : Implied Volatility, Stochastic Volatility Model, Jump Diffusion Model, Skewness, Kurtosis.
Author: Pascal Debus
Publisher: GRIN Verlag
ISBN: 3656491941
Category : Business & Economics
Languages : de
Pages : 59
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Bachelorarbeit aus dem Jahr 2010 im Fachbereich BWL - Investition und Finanzierung, Note: 1,2, EBS Universität für Wirtschaft und Recht, Sprache: Deutsch, Abstract: The Black-Scholes (or Black-Scholes-Merton) Model has become the standard model for the pricing of options and can surely be seen as one of the main reasons for the growth of the derivative market after the model ́s introduction in 1973. As a consequence, the inventors of the model, Robert Merton, Myron Scholes, and without doubt also Fischer Black, if he had not died in 1995, were awarded the Nobel prize for economics in 1997. The model, however, makes some strict assumptions that must hold true for accurate pricing of an option. The most important one is constant volatility, whereas empirical evidence shows that volatility is heteroscedastic. This leads to increased mispricing of options especially in the case of out of the money options as well as to a phenomenon known as volatility smile. As a consequence, researchers introduced various approaches to expand the model by allowing the volatility to be non-constant and to follow a sto-chastic process. It is the objective of this thesis to investigate if the pricing accuracy of the Black-Scholes model can be significantly improved by applying a stochastic volatility model.
Author: Peter Tankov
Publisher: CRC Press
ISBN: 1135437947
Category : Business & Economics
Languages : en
Pages : 552
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WINNER of a Riskbook.com Best of 2004 Book Award! During the last decade, financial models based on jump processes have acquired increasing popularity in risk management and option pricing. Much has been published on the subject, but the technical nature of most papers makes them difficult for nonspecialists to understand, and the mathematic
Author: Thomas More Arnold
Publisher:
ISBN:
Category :
Languages : en
Pages : 240
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Author: Jun Yue
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Nowadays, financial derivatives play an increasingly important role in the global financial system, and options are popular structural financial derivatives, which attract much attention from academia and the industry. China Financial Futures Exchange (CFFEX) initiated the CSI 1000 index future and CSI 1000 index option in the Chinese market on July 22, 2022, which indicates a trend of acceleration in financial innovations in China's financial market. This dissertation focuses on the volatility models in option pricing and modern numerical procedures that approximate option prices. In this dissertation, different stochastic volatility models, for example, the Black-Scholes model and the Heston stochastic volatility model, are introduced and applied to price in not only European options but also exotic options, which possess complicated payoff structures. Moreover, a comprehensive empirical analysis is conducted to demonstrate these option pricing algorithms based on the recent data of CSI 1000 index options in the Chinese market.
Author: David Scott Bates
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 72
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This paper discusses the commonly used methods for testing option pricing models, including the Black-Scholes, constant elasticity of variance, stochastic volatility, and jump-diffusion models. Since options are derivative assets, the central empirical issue is whether the distributions implicit in option prices are consistent with the time series properties of the underlying asset prices. Three relevant aspects of consistency are discussed, corresponding to whether time series-based inferences and option prices agree with respect to volatility, changes in volatility, and higher moments. The paper surveys the extensive empirical literature on stock options, options on stock indexes and stock index futures, and options on currencies and currency futures
