Results 11 to 20 of about 14,628 (253)
Realizing smiles: Options pricing with realized volatility [PDF]
SSRN Electronic Journal, 2012 We develop a discrete-time stochastic volatility option pricing model exploiting the information contained in the Realized Volatility (RV), which is used as a proxy of the unobservable log-return volatility. We model the RV dynamics by a simple and effective long-memory process, whose parameters can be easily estimated using historical data.
Fulvio Corsi +2 more
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To sigmoid-based functional description of the volatility smile [PDF]
The North American Journal of Economics and Finance, 2014 32 pages, 18 figures, 5 ...
Andrey Itkin
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A Jump Diffusion Model for Option Pricing with Three Properties: Leptokurtic Feature, Volatility Smile, and Analytical Tractability [PDF]
, 2002 Brownian motion and normal distribution have been widely used, for example, in the Black-Scholes-Merton option pricing framework, to study the return of assets.
Steven Kou
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Volatility smile and stochastic arbitrage returns [PDF]
, 2004 The purpose of this work is to explore the role that random arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary ergodic random process rapidly varying in time. We exploit the fact that option price and random arbitrage
Sergei Fedotov, Stephanos Panayides
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Why do we smile? On the determinants of the implied volatility function. [PDF]
, 1999 We report simple regressions and Granger causality tests in order to understand the pattern of implied volatilities across exercise prices. We employ all calls and puts transacted between 16:00 and 16:45 on the Spanish IBEX-35 index from January 1994 to ...
Peña Sánchez de Rivera, Juan Ignacio +2 more
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The Black-Scholes formula and volatility smile.
, 2012 THE BLACK-SCHOLES FORMULA AND VOLATILITY SMILE Brian M. Butler April 23, 2012 This paper investigates the development and applications of the Black-Scholes formula. This well-known formula is a continuous time model used primarily to price European style options.
Brian Butler
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From volatility smiles to the volatility of volatility [PDF]
Decisions in Economics and Finance, 2019 The paper reviews models of the option surface and reduced-form models for stochastic volatility in continuous time, under the risk-neutral measure. It defines “forward volatilities,” analogous to forward interest rates in the theory of the term structure, and provides a proof that the forward volatility is a conditional expected value, under the risk ...
Bernard Dumas +3 more
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The Heston Model with Time-Dependent Correlation Driven by Isospectral Flows
Mathematics, 2021 In this work, we extend the Heston stochastic volatility model by including a time-dependent correlation that is driven by isospectral flows instead of a constant correlation, being motivated by the fact that the correlation between, e.g., financial ...
Long Teng
doaj +1 more source
Journal of Function Spaces, 2021 It has been found that the surface of implied volatility has appeared in financial market embrace volatility “Smile” and volatility “Smirk” through the long-term observation.
Yanli Zhou +3 more
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Smiling for the Delayed Volatility Swaps [PDF]
Wilmott, 2011 We present a variance drift-adjusted version of the Heston model which leads to a significant improvement of the market volatility surface fitting (compared with Heston). The numerical example we performed with recent market data shows a significant reduction of the average absolute calibration error (calibration on 12 dates ranging from September 19 ...
Anatoliy Swishchuk, Nelson Vadori
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