Results 31 to 40 of about 22,197 (142)

Stochastic Price Dynamics Implied By the Limit Order Book [PDF]

arXiv, 2011
In this paper we present a novel approach to the determination of fat tails in financial data by studying the information contained in the limit order book. In an order-driven market buyers and sellers may submit limit orders, which are executed when the price touches a pre-specified lower, respectively higher, limit-price. We show that, in equilibrium,
arxiv  

Option Valuation under Stochastic Volatility [PDF]

This book provides an advanced treatment of option valuation. The general setting is that of 2D continuous-time models with stochastic volatility. Explicit equilibrium risk adjustments and many other new results are provided.
Alan L. Lewis, Alan L. Lewis
core   +6 more sources

Smiling under stochastic volatility [PDF]

This paper studies the behavior of the implied volatility function (smile) when the true distribution of the underlying asset is consistent with the stochastic volatility model proposed by Heston (1993). The main result of the paper is to extend previous
León, Angel, Rubio Irigoyen, Gonzalo
core  

Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model [PDF]

, 2020
This dissertation examines the performance of two log-normal rational pricing kernel models and their calibration to the South African Inter-bank interest rate market. We investigate using Monte-Carlo simulation to price caps, floors and swaptions. Model-
Hammond, Graeme
core   +1 more source

Implied volatility smile dynamics in the presence of jumps [PDF]

arXiv, 2017
The main purpose of this work is to examine the behavior of the implied volatility smiles around jumps, contributing to the literature with a high-frequency analysis of the smile dynamics based on intra-day option data. From our high-frequency SPX S\&P500 index option dataset, we utilize the first three principal components to characterize the implied ...
arxiv  

Interest Rate Caps Smile Too! But Can the LIBOR Market Models Capture It? [PDF]

Using more than two years of daily interest rate cap price data, this paper provides a systematic documentation of a volatility smile in cap prices. We find that Black (1976) implied volatilities exhibit an asymmetric smile (sometimes called a sneer ...
Feng Zhao, Haitao Li, Robert Jarrow
core  

Volatility options in rough volatility models [PDF]

arXiv, 2018
We discuss the pricing and hedging of volatility options in some rough volatility models. First, we develop efficient Monte Carlo methods and asymptotic approximations for computing option prices and hedge ratios in models where log-volatility follows a Gaussian Volterra process.
arxiv  

Short and Long Term Smile Effects: The Binomial Normal Mixture Diffusion Model [PDF]

This paper extends the normal mixture diffusion (NMD) local volatility model of Brigo and Mercurio (2000, 2001a,b, 2002) so that it explains both short-term and long-term smile effects.
Carol Alexander
core  

Non-traded call's volatility smiles [PDF]

arXiv, 2019
Real life hedging in the Black-Scholes model must be imperfect and if the stock's drift is higher than the risk free rate, leads to a profit on average. Hence the option price is examined as a fair game agreement between the parties, based on expected payoffs and a simple measure of risk. The resulting prices result in the volatility smile.
arxiv  

Forecasting Implied Volatility Smile Surface via Deep Learning and Attention Mechanism [PDF]

arXiv, 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 method combining deep learning and attention mechanism is pioneeringly established.
arxiv