Markov Modulated Jump Diffusions For Currency Option Pricing

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Markov-Modulated Jump-Diffusions for Currency Option Pricing

Author : Xuewei Yang
Publisher :
ISBN 13 :
Total Pages : 17 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Markov-Modulated Jump-Diffusions for Currency Option Pricing by : Xuewei Yang

Download or read book Markov-Modulated Jump-Diffusions for Currency Option Pricing written by Xuewei Yang and published by . This book was released on 2011 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article introduces dynamic models for the spot foreign exchange rate with capturing both the rare events and the time-inhomogeneity in the fluctuating currency market. For the rare events, we use a compound Poisson process with log-normal jump amplitude to describe the jumps. As for the time-inhomogeneity in the market dynamics, we particularly stress the strong dependence of the domestic/foreign interest rates, the appreciation rate and the volatility of the foreign currency on the time-varying sovereign ratings in the currency market. The time-varying ratings are formulated by a continuous-time finite-state Markov chain. Based on such a spot foreign exchange rate dynamics, we then study the pricing of some currency options. Here we will adopt a so-called regime-switching Esscher transform to identify a risk-neutral martingale measure. By determining the regime-switching Esscher parameters we then get an integral expression on the prices of European-style currency options. Finally, numerical illustrations are given.

An Empirical Analysis of Jump Diffusion Stochastic Volatility Models for Currency Option Pricing

Author : Lei Zhang
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (793 download)

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Book Synopsis An Empirical Analysis of Jump Diffusion Stochastic Volatility Models for Currency Option Pricing by : Lei Zhang

Download or read book An Empirical Analysis of Jump Diffusion Stochastic Volatility Models for Currency Option Pricing written by Lei Zhang and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Jumps and Stochastic Volatility

Author : David S. Bates
Publisher :
ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (318 download)

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Book Synopsis Jumps and Stochastic Volatility by : David S. Bates

Download or read book Jumps and Stochastic Volatility written by David S. Bates and published by . This book was released on 1993 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Computational Intelligence Techniques for Trading and Investment

Author : Christian Dunis
Publisher : Routledge
ISBN 13 : 1136195114
Total Pages : 239 pages
Book Rating : 4.1/5 (361 download)

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Book Synopsis Computational Intelligence Techniques for Trading and Investment by : Christian Dunis

Download or read book Computational Intelligence Techniques for Trading and Investment written by Christian Dunis and published by Routledge. This book was released on 2014-03-26 with total page 239 pages. Available in PDF, EPUB and Kindle. Book excerpt: Computational intelligence, a sub-branch of artificial intelligence, is a field which draws on the natural world and adaptive mechanisms in order to study behaviour in changing complex environments. This book provides an interdisciplinary view of current technological advances and challenges concerning the application of computational intelligence techniques to financial time-series forecasting, trading and investment. The book is divided into five parts. The first part introduces the most important computational intelligence and financial trading concepts, while also presenting the most important methodologies from these different domains. The second part is devoted to the application of traditional computational intelligence techniques to the fields of financial forecasting and trading, and the third part explores the applications of artificial neural networks in these domains. The fourth part delves into novel evolutionary-based hybrid methodologies for trading and portfolio management, while the fifth part presents the applications of advanced computational intelligence modelling techniques in financial forecasting and trading. This volume will be useful for graduate and postgraduate students of finance, computational finance, financial engineering and computer science. Practitioners, traders and financial analysts will also benefit from this book.

Pricing Currency Options Under Stochastic Interest Rates and Jump-Diffusion Processes

Author : Ako Doffou
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Pricing Currency Options Under Stochastic Interest Rates and Jump-Diffusion Processes by : Ako Doffou

Download or read book Pricing Currency Options Under Stochastic Interest Rates and Jump-Diffusion Processes written by Ako Doffou and published by . This book was released on 2007 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the effects of stochastic interest rates and jumps in the spot exchange rate on the pricing of currency futures, forwards and futures options. The proposed model extends Bates' model by allowing both the domestic and foreign interest rates to move around randomly, in a generalized Vasicek term-structure framework. Numerical examples show that the model prices of European currency futures options are similar to those given by Bates' and Black's models in the absence of jumps and when the volatilities of the domestic and foreign interest rates and futures price are negligible. Changes in these volatilities affect the futures options prices. bates' and Black's models underprice the European currency futures options in both the presence and the absence of jumps. The mispricing increases with the volatilities of interest rates and futures prices.

Explicit Valuation of Currency Options with Regime-Switching Risk Premium

Author : Son-Nan Chen
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Explicit Valuation of Currency Options with Regime-Switching Risk Premium by : Son-Nan Chen

Download or read book Explicit Valuation of Currency Options with Regime-Switching Risk Premium written by Son-Nan Chen and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Spot foreign exchange (FX) rates usually exhibit volatility clustering and regime switching in a finite number of states due to change in macroeconomic factors or financial crises. We provide regime-switching evidence based on yield-curves data under the Markov-modulated diffusion (MMD) model. A MMD model is proposed to incorporate Markov chain that is capable of capturing the dynamic feature of the spot FX rate. In addition, Markovian Jumps due to change in the state of the economy is formulated by Markov chain. Markovian jumps are embedded in a pricing kernel such that regime-switching risk is priced. An explicit valuation model of currency call options under the MMD model is derived. Empirical study shows that the derived valuation model with regime-switching risk is not only more complete but also appropriate for pricing European currency options on the spot FX rate.

Applied Mathematics and Computational Intelligence

Author : Anna M. Gil-Lafuente
Publisher : Springer
ISBN 13 : 331975792X
Total Pages : 439 pages
Book Rating : 4.3/5 (197 download)

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Book Synopsis Applied Mathematics and Computational Intelligence by : Anna M. Gil-Lafuente

Download or read book Applied Mathematics and Computational Intelligence written by Anna M. Gil-Lafuente and published by Springer. This book was released on 2018-03-06 with total page 439 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book gathers selected papers presented at the conference of the Forum for Interdisciplinary Mathematics (FIM), held at Palau Macaya, Barcelona, on 18 to 20 November, 2015. The event was co-organized by the University of Barcelona (Spain), the Spanish Royal Academy of Economic and Financial Sciences (Spain) and the Forum for Interdisciplinary Mathematics (India). This instalment of the conference was presented with the title “Applied Mathematics and Computational Intelligence” and particularly focused on the use of Mathematics and Computational Intelligence techniques in a diverse range of scientific disciplines, as well as their applications in real-world problems. The book presents thirty peer-reviewed research papers, organised into four topical sections: on Mathematical Foundations; Computational Intelligence and Optimization Techniques; Modelling and Simulation Techniques; and Applications in Business and Engineering. This book will be of great interest to anyone working in the area of applied mathematics and computational intelligence and will be especially useful for scientists and graduate students pursuing research in these fields.

Dynamic Analyzing and Option Pricing of G-10 Exchange Rates

Author : 吳安琪
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (12 download)

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Book Synopsis Dynamic Analyzing and Option Pricing of G-10 Exchange Rates by : 吳安琪

Download or read book Dynamic Analyzing and Option Pricing of G-10 Exchange Rates written by 吳安琪 and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Jumps and Stochastic Volatility

Author : David S. Bates
Publisher :
ISBN 13 :
Total Pages : 56 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Jumps and Stochastic Volatility by : David S. Bates

Download or read book Jumps and Stochastic Volatility written by David S. Bates and published by . This book was released on 2010 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Option Pricing in a Jump Diffusion Setting

Author : Patrick Meredith Muchmore
Publisher :
ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (645 download)

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Book Synopsis Option Pricing in a Jump Diffusion Setting by : Patrick Meredith Muchmore

Download or read book Option Pricing in a Jump Diffusion Setting written by Patrick Meredith Muchmore and published by . This book was released on 2005 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Option Pricing for a Stochastic-volatility Jump-diffusion Model

Author : Guoqing Yan
Publisher :
ISBN 13 : 9781109872637
Total Pages : 114 pages
Book Rating : 4.8/5 (726 download)

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Book Synopsis Option Pricing for a Stochastic-volatility Jump-diffusion Model by : Guoqing Yan

Download or read book Option Pricing for a Stochastic-volatility Jump-diffusion Model written by Guoqing Yan and published by . This book was released on 2006 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt: Based on the accurate and fast European option pricing formulas, we calibrate the models to S&P 500 Index option quotes by least squares method. Spot variance and structural parameters for different models including Black-Scholes, Stochastic-Volatility. SVJD-Uniform, SVJD-Normal, SVJD-DbExp are estimated. Fitting performance of different models are compared and our proposed SVJD-Uniform model is found to fit the market data the best.

Hidden Markov Models in Finance

Author : Rogemar S. Mamon
Publisher : Springer
ISBN 13 : 1489974423
Total Pages : 280 pages
Book Rating : 4.4/5 (899 download)

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Book Synopsis Hidden Markov Models in Finance by : Rogemar S. Mamon

Download or read book Hidden Markov Models in Finance written by Rogemar S. Mamon and published by Springer. This book was released on 2014-05-14 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the groundbreaking research of Harry Markowitz into the application of operations research to the optimization of investment portfolios, finance has been one of the most important areas of application of operations research. The use of hidden Markov models (HMMs) has become one of the hottest areas of research for such applications to finance. This handbook offers systemic applications of different methodologies that have been used for decision making solutions to the financial problems of global markets. As the follow-up to the authors’ Hidden Markov Models in Finance (2007), this offers the latest research developments and applications of HMMs to finance and other related fields. Amongst the fields of quantitative finance and actuarial science that will be covered are: interest rate theory, fixed-income instruments, currency market, annuity and insurance policies with option-embedded features, investment strategies, commodity markets, energy, high-frequency trading, credit risk, numerical algorithms, financial econometrics and operational risk. Hidden Markov Models in Finance: Further Developments and Applications, Volume II presents recent applications and case studies in finance and showcases the formulation of emerging potential applications of new research over the book’s 11 chapters. This will benefit not only researchers in financial modeling, but also others in fields such as engineering, the physical sciences and social sciences. Ultimately the handbook should prove to be a valuable resource to dynamic researchers interested in taking full advantage of the power and versatility of HMMs in accurately and efficiently capturing many of the processes in the financial market.

Handbook Of Financial Econometrics, Mathematics, Statistics, And Machine Learning (In 4 Volumes)

Author : Cheng Few Lee
Publisher : World Scientific
ISBN 13 : 9811202400
Total Pages : 5053 pages
Book Rating : 4.8/5 (112 download)

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Book Synopsis Handbook Of Financial Econometrics, Mathematics, Statistics, And Machine Learning (In 4 Volumes) by : Cheng Few Lee

Download or read book Handbook Of Financial Econometrics, Mathematics, Statistics, And Machine Learning (In 4 Volumes) written by Cheng Few Lee and published by World Scientific. This book was released on 2020-07-30 with total page 5053 pages. Available in PDF, EPUB and Kindle. Book excerpt: This four-volume handbook covers important concepts and tools used in the fields of financial econometrics, mathematics, statistics, and machine learning. Econometric methods have been applied in asset pricing, corporate finance, international finance, options and futures, risk management, and in stress testing for financial institutions. This handbook discusses a variety of econometric methods, including single equation multiple regression, simultaneous equation regression, and panel data analysis, among others. It also covers statistical distributions, such as the binomial and log normal distributions, in light of their applications to portfolio theory and asset management in addition to their use in research regarding options and futures contracts.In both theory and methodology, we need to rely upon mathematics, which includes linear algebra, geometry, differential equations, Stochastic differential equation (Ito calculus), optimization, constrained optimization, and others. These forms of mathematics have been used to derive capital market line, security market line (capital asset pricing model), option pricing model, portfolio analysis, and others.In recent times, an increased importance has been given to computer technology in financial research. Different computer languages and programming techniques are important tools for empirical research in finance. Hence, simulation, machine learning, big data, and financial payments are explored in this handbook.Led by Distinguished Professor Cheng Few Lee from Rutgers University, this multi-volume work integrates theoretical, methodological, and practical issues based on his years of academic and industry experience.

Currency Derivative and International Term Structure Pricing in a Stochastic Interest Rate, Stochastic Volatility and Stochastic Jump Intensity World

Download Currency Derivative and International Term Structure Pricing in a Stochastic Interest Rate, Stochastic Volatility and Stochastic Jump Intensity World PDF Online Free

Author : Shijun Liu
Publisher :
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Currency Derivative and International Term Structure Pricing in a Stochastic Interest Rate, Stochastic Volatility and Stochastic Jump Intensity World by : Shijun Liu

Download or read book Currency Derivative and International Term Structure Pricing in a Stochastic Interest Rate, Stochastic Volatility and Stochastic Jump Intensity World written by Shijun Liu and published by . This book was released on 2007 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We first derive closed form solutions for currency options, currency futures, future options and the term structures of interest rates in a diffusion-jump model of stochastic interest rate, stochastic volatility and time varying jump intensity in currency price. We demonstrate that the introduction of constant jump intensity in the nominal stochastic discount factor shifts the whole term structure of interest rates vertically but has no influence on its shape. However, when the jump intensity is endogenous (time varying) the shape of the term structure is influenced through the factor sensitivity of interest rates. We also document considerable improvement in currency option pricing precision over alternative models if the true model is diffusion-jump with endogenous intensity in a simulation experiment. We conclude that allowing for multidimensional interaction is of significant qualitative and quantitative importance for the pricing of currency options and for understanding the shape of the term structure.

Hidden Markov Models in Finance

Author : Rogemar S. Mamon
Publisher : Springer Science & Business Media
ISBN 13 : 0387711635
Total Pages : 203 pages
Book Rating : 4.3/5 (877 download)

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Book Synopsis Hidden Markov Models in Finance by : Rogemar S. Mamon

Download or read book Hidden Markov Models in Finance written by Rogemar S. Mamon and published by Springer Science & Business Media. This book was released on 2007-04-26 with total page 203 pages. Available in PDF, EPUB and Kindle. Book excerpt: A number of methodologies have been employed to provide decision making solutions globalized markets. Hidden Markov Models in Finance offers the first systematic application of these methods to specialized financial problems: option pricing, credit risk modeling, volatility estimation and more. The book provides tools for sorting through turbulence, volatility, emotion, chaotic events – the random "noise" of financial markets – to analyze core components.

Modeling and Pricing of Swaps for Financial and Energy Markets with Stochastic Volatilities

Author : Anatoli? Vital?evich Svishchuk
Publisher : World Scientific
ISBN 13 : 9814440132
Total Pages : 326 pages
Book Rating : 4.8/5 (144 download)

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Book Synopsis Modeling and Pricing of Swaps for Financial and Energy Markets with Stochastic Volatilities by : Anatoli? Vital?evich Svishchuk

Download or read book Modeling and Pricing of Swaps for Financial and Energy Markets with Stochastic Volatilities written by Anatoli? Vital?evich Svishchuk and published by World Scientific. This book was released on 2013 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modeling and Pricing of Swaps for Financial and Energy Markets with Stochastic Volatilities is devoted to the modeling and pricing of various kinds of swaps, such as those for variance, volatility, covariance, correlation, for financial and energy markets with different stochastic volatilities, which include CIR process, regime-switching, delayed, mean-reverting, multi-factor, fractional, Levy-based, semi-Markov and COGARCH(1,1). One of the main methods used in this book is change of time method. The book outlines how the change of time method works for different kinds of models and problems arising in financial and energy markets and the associated problems in modeling and pricing of a variety of swaps. The book also contains a study of a new model, the delayed Heston model, which improves the volatility surface fitting as compared with the classical Heston model. The author calculates variance and volatility swaps for this model and provides hedging techniques. The book considers content on the pricing of variance and volatility swaps and option pricing formula for mean-reverting models in energy markets. Some topics such as forward and futures in energy markets priced by multi-factor Levy models and generalization of Black-76 formula with Markov-modulated volatility are part of the book as well, and it includes many numerical examples such as S&P60 Canada Index, S&P500 Index and AECO Natural Gas Index.

Ruin Probabilities

Author : S?ren Asmussen
Publisher : World Scientific
ISBN 13 : 9814282529
Total Pages : 621 pages
Book Rating : 4.8/5 (142 download)

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Book Synopsis Ruin Probabilities by : S?ren Asmussen

Download or read book Ruin Probabilities written by S?ren Asmussen and published by World Scientific. This book was released on 2010 with total page 621 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book gives a comprehensive treatment of the classical and modern ruin probability theory. Some of the topics are Lundberg's inequality, the Cramr?Lundberg approximation, exact solutions, other approximations (e.g., for heavy-tailed claim size distributions), finite horizon ruin probabilities, extensions of the classical compound Poisson model to allow for reserve-dependent premiums, Markov-modulation, periodicity, change of measure techniques, phase-type distributions as a computational vehicle and the connection to other applied probability areas, like queueing theory. In this substantially updated and extended second version, new topics include stochastic control, fluctuation theory for Levy processes, Gerber?Shiu functions and dependence.