Download or read book Hedging of Time Discrete Auto Regressive Stochastic Volatility Options written by Alexandru Badescu and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerous empirical proofs indicate the adequacy of the time discrete auto-regressive stochastic volatility models introduced by Taylor in the dynamical description of the log-returns of financial assets. The pricing and hedging of contingent products that use these models for their underlying assets is a complicated task due to the incomplete nature of the corresponding market and the non-observability of the associated volatility process. In this paper we introduce new pricing kernels for this setup and apply two existing volatility filtering techniques available in the literature for these models, namely Kalman filtering and the hierarchical-likelihood approach, in order to implement various pricing and dynamical hedging strategies. An extensive empirical analysis using both historical returns and options data illustrates the advantages of this model when compared with more standard approaches, namely Black-Scholes and GARCH.

Download or read book A New Class of Discrete Time Stochastic Volatility Model with Correlated Errors written by Sujay Mukhoti and published by . This book was released on 2017 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: In an efficient stock market, the returns and their time-dependent volatility are often jointly modeled by stochastic volatility models (SVMs). Over the last few decades several SVMs have been proposed to adequately capture the defining features of the relationship between the return and its volatility. Among one of the earliest SVM, Taylor (1982) proposed a hierarchical model, where the current return is a function of the current latent volatility, which is further modeled as an auto-regressive process. In an attempt to make the SVMs more appropriate for complex realistic market behavior, a leverage parameter was introduced in the Taylor's SVM, which however led to the violation of the efficient market hypothesis (EMH, a necessary mean-zero condition for the return distribution that prevents arbitrage possibilities). Subsequently, a host of alternative SVMs had been developed and are currently in use. In this paper, we propose mean-corrections for several generalizations of Taylor's SVM that capture the complex market behavior as well as satisfy EMH. We also establish a few theoretical results to characterize the key desirable features of these models, and present comparison with other popular competitors. Furthermore, four real-life examples (Oil price, CITI bank stock price, Euro-USD rate, and S&P 500 index returns) have been used to demonstrate the performance of this new class of SVMs.

Download or read book Hedging Options with Local and Stochastic Volatility Models written by Leonardo Martins Nogueira and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Hedging Exotic Options in Stochastic Volatility and Jump Diffusion Models written by Kai Detlefsen and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stochastic Volatility Long term Options and Discrete time Problems in FX written by Francois-Stephane Robert Andre Mantion and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Discrete Time Stochastic Volatility Model written by Guojing Tang and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book On the Valuation of Fader and Discrete Barrier Options in Heston s Stochastic Volatility Model written by Susanne Griebsch and published by . This book was released on 2008 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Hedging in Affine Stochastic Volatility Models written by Richard Vierthauer and published by . This book was released on 2010 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Mean Variance Hedging for Stochastic Volatility Models written by Francesca Biagini and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we discuss the tractability of stochastic volatility models for pricing and hedging options with the mean-variance hedging approach. We characterize the variance-optimal measure as the solution of an equation between Doleans exponentials; explicit examples include both models wherevolatility solves a diffusion equation and models where it follows a jump process. We further discussthe closedness of the space of strategies.

Download or read book Stochastic volatility models Efficiency and Hedging written by and published by . This book was released on 2013 with total page 93 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Statistical Methods in Finance written by G. S. Maddala and published by . This book was released on 1996-12-11 with total page 760 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive reference work for teaching at graduate level and research in empirical finance. The chapters cover a wide range of statistical and probabilistic methods applied to a variety of financial methods and are written by internationally renowned experts.

Download or read book Innovations in Insurance Risk and Asset Management written by Kathrin Glau and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Soft Computing and Signal Processing written by Jiacun Wang and published by Springer. This book was released on 2019-02-13 with total page 783 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book includes research papers on current developments in the field of soft computing and signal processing, selected from papers presented at the International Conference on Soft Computing and Signal Processing (ICSCSP 2018). It features papers on current topics, such as soft sets, rough sets, fuzzy logic, neural networks, genetic algorithms and machine learning. It also discusses various aspects of these topics, like technologies, product implementation, and application issues.

Download or read book Arbitrage Theory in Continuous Time written by Tomas Björk and published by OUP Oxford. This book was released on 2009-08-06 with total page 600 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third edition of this popular introduction to the classical underpinnings of the mathematics behind finance continues to combine sound mathematical principles with economic applications. Concentrating on the probabilistic theory of continuous arbitrage pricing of financial derivatives, including stochastic optimal control theory and Merton's fund separation theory, the book is designed for graduate students and combines necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises, and suggests further reading in each chapter. In this substantially extended new edition Bjork has added separate and complete chapters on the martingale approach to optimal investment problems, optimal stopping theory with applications to American options, and positive interest models and their connection to potential theory and stochastic discount factors. More advanced areas of study are clearly marked to help students and teachers use the book as it suits their needs.

Download or read book Interest Rate Models Theory and Practice written by Damiano Brigo and published by Springer Science & Business Media. This book was released on 2007-09-26 with total page 1016 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 2nd edition of this successful book has several new features. The calibration discussion of the basic LIBOR market model has been enriched considerably, with an analysis of the impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on the calibration outputs. A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption-volatility interpolation technique has been introduced. The old sections devoted to the smile issue in the LIBOR market model have been enlarged into a new chapter. New sections on local-volatility dynamics, and on stochastic volatility models have been added, with a thorough treatment of the recently developed uncertain-volatility approach. Examples of calibrations to real market data are now considered. The fast-growing interest for hybrid products has led to a new chapter. A special focus here is devoted to the pricing of inflation-linked derivatives. The three final new chapters of this second edition are devoted to credit. Since Credit Derivatives are increasingly fundamental, and since in the reduced-form modeling framework much of the technique involved is analogous to interest-rate modeling, Credit Derivatives -- mostly Credit Default Swaps (CDS), CDS Options and Constant Maturity CDS - are discussed, building on the basic short rate-models and market models introduced earlier for the default-free market. Counterparty risk in interest rate payoff valuation is also considered, motivated by the recent Basel II framework developments.

Download or read book Empirical Dynamic Asset Pricing written by Kenneth J. Singleton and published by Princeton University Press. This book was released on 2009-12-13 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by one of the leading experts in the field, this book focuses on the interplay between model specification, data collection, and econometric testing of dynamic asset pricing models. The first several chapters provide an in-depth treatment of the econometric methods used in analyzing financial time-series models. The remainder explores the goodness-of-fit of preference-based and no-arbitrage models of equity returns and the term structure of interest rates; equity and fixed-income derivatives prices; and the prices of defaultable securities. Singleton addresses the restrictions on the joint distributions of asset returns and other economic variables implied by dynamic asset pricing models, as well as the interplay between model formulation and the choice of econometric estimation strategy. For each pricing problem, he provides a comprehensive overview of the empirical evidence on goodness-of-fit, with tables and graphs that facilitate critical assessment of the current state of the relevant literatures. As an added feature, Singleton includes throughout the book interesting tidbits of new research. These range from empirical results (not reported elsewhere, or updated from Singleton's previous papers) to new observations about model specification and new econometric methods for testing models. Clear and comprehensive, the book will appeal to researchers at financial institutions as well as advanced students of economics and finance, mathematics, and science.

Download or read book How I Became a Quant written by Richard R. Lindsey and published by John Wiley & Sons. This book was released on 2011-01-11 with total page 406 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for How I Became a Quant "Led by two top-notch quants, Richard R. Lindsey and Barry Schachter, How I Became a Quant details the quirky world of quantitative analysis through stories told by some of today's most successful quants. For anyone who might have thought otherwise, there are engaging personalities behind all that number crunching!" --Ira Kawaller, Kawaller & Co. and the Kawaller Fund "A fun and fascinating read. This book tells the story of how academics, physicists, mathematicians, and other scientists became professional investors managing billions." --David A. Krell, President and CEO, International Securities Exchange "How I Became a Quant should be must reading for all students with a quantitative aptitude. It provides fascinating examples of the dynamic career opportunities potentially open to anyone with the skills and passion for quantitative analysis." --Roy D. Henriksson, Chief Investment Officer, Advanced Portfolio Management "Quants"--those who design and implement mathematical models for the pricing of derivatives, assessment of risk, or prediction of market movements--are the backbone of today's investment industry. As the greater volatility of current financial markets has driven investors to seek shelter from increasing uncertainty, the quant revolution has given people the opportunity to avoid unwanted financial risk by literally trading it away, or more specifically, paying someone else to take on the unwanted risk. How I Became a Quant reveals the faces behind the quant revolution, offering you?the?chance to learn firsthand what it's like to be a?quant today. In this fascinating collection of Wall Street war stories, more than two dozen quants detail their roots, roles, and contributions, explaining what they do and how they do it, as well as outlining the sometimes unexpected paths they have followed from the halls of academia to the front lines of an investment revolution.