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FX Volatility Smile Construction [PDF]
Wilmott, 2012 The foreign exchange options market is one of the largest and most liquid OTC derivative markets in the world. Surprisingly, very little is known in the academic literature about the construction of the most important object in this market: The implied volatility smile.
Dimitri Reiswich, Uwe Wystup
core +7 more sources
Volatility smile at the Russian option market
Journal of Business Economics and Management, 2006 The main derivative exchange in Russia is FORTS (Futures and Options in RTS) which is a division of Russian Trade System (RTS). The underlying assets of option contracts are futures on Russian companies’ shares: OJSC “EES"1, OJPC “Lukoil"2 and OJSC ...
D. Golembiovsky, I. Baryshnikov
doaj +5 more sources
Volatility Smile as Relativistic Effect [PDF]
Physica A: Statistical Mechanics and its Applications, 2017 We give an explicit formula for the probability distribution based on a relativistic extension of Brownian motion. The distribution 1) is properly normalized and 2) obeys the tower law (semigroup property), so we can construct martingales and self-financing hedging strategies and price claims (options). This model is a 1-constant-parameter extension of
Zura Kakushadze
semanticscholar +6 more sources
Implied volatility estimation of bitcoin options and the stylized facts of option pricing [PDF]
Financial Innovation, 2021 The recently developed Bitcoin futures and options contracts in cryptocurrency derivatives exchanges mark the beginning of a new era in Bitcoin price risk hedging.
Noshaba Zulfiqar, Saqib Gulzar
doaj +2 more sources
Quanto Implied Volatility Smile
SSRN Electronic Journal, 2014 We propose a numerical procedure, addressed as copula integration method, to calculate quanto implied volatility adjustments. The method consists in a direct integration of the quanto vanilla payoff, using the bivariate terminal probability distribution of the asset and the relevant foreign exchange rate. The bivariate terminal distribution is obtained
Alessandro Cesarini, Stefano Giovannitti
semanticscholar +3 more sources
Forecasting Implied Volatility Smile Surface via Deep Learning and Attention Mechanism [PDF]
Social Science Research Network, 2019 The implied volatility smile surface is the basis of option pricing, and the dynamic evolution of the option volatility smile surface is difficult to predict. In this paper, attention mechanism is introduced into LSTM, and a volatility surface prediction
Shengli Chen, Zili Zhang
semanticscholar +4 more sources
Capturing the volatility smile: parametric volatility models versus stochastic volatility models [PDF]
Public and Municipal Finance, 2016 Black-Scholes option pricing model (1973) assumes that all option prices on the same underlying asset with the same expiration date, but different exercise prices should have the same implied volatility.
Belen Blanco
doaj +2 more sources
SSRN Electronic Journal, 2001 The paper assumes that the implied volatility of options with some given expiration is a quadratic function of the moneyness. The coefficients of this quadratic function (the smile) are time dependent and stochastic. The paper derives exposure parameters of the price of the option to the local change in each of the smile coefficients, and an ...
Haim Reisman
openalex +2 more sources
MERTON JUMP-DIFFUSION MODEL VERSUS THE BLACK AND SCHOLES APPROACH FOR THE LOG-RETURNS AND VOLATILITY SMILE FITTING [PDF]
, 2016 In the present paper we perform a comparison between the standard Black and Scholes model and the Merton jump-diffusion one, from the point of view of the study of the leptokurtic feature of log-returns and also concerning the volatility smile fitting ...
N. Gugole
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Smiling for the Delayed Volatility Swap
SSRN Electronic Journal, 2011 Using change of time method, we derive a closed-form formula for the volatility swap in an adjusted version of the Heston model with stochastic volatility with delay. The numerical result is presented for underlying EURUSD on September 30th 2011. The novelty of the paper is two-fold: application of change of time method to the delayed Heston model and ...
Anatoliy Swishchuk, Nelson Vadori
openalex +2 more sources