Read Books Online and Download eBooks, EPub, PDF, Mobi, Kindle, Text Full Free.
Principal Component Analysis Of Volatility Smiles And Skews
Download Principal Component Analysis Of Volatility Smiles And Skews full books in PDF, epub, and Kindle. Read online Principal Component Analysis Of Volatility Smiles And Skews ebook anywhere anytime directly on your device. Fast Download speed and no annoying ads. We cannot guarantee that every ebooks is available!
Book Synopsis Principal Component Analysis of Volatility Smiles and Skews by : Carol Alexander
Download or read book Principal Component Analysis of Volatility Smiles and Skews written by Carol Alexander and published by . This book was released on 2001 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model for volatility sensitivity to the underlying asset price. It has applications to option pricing and dynamic delta hedging under stochastic volatility. The model allows at-the-money volatility sensitivity to change continuously with S and this corresponds to a quadratic parameterization to the volatility surface. The extension to fixed strike volatility sensitivities is achieved using a principal component analysis on the deviation of fixed strike volatilities from at-the-money volatility.
Book Synopsis The Dynamics of Smiles by : George S. Skiadopoulos
Download or read book The Dynamics of Smiles written by George S. Skiadopoulos and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This empirical study is motivated by the models of Dupire (1992) and Derman and Kani (1997). We investigate the number and shape of shocks that move implied volatility smiles and subsequently we look at the correlation of changes in volatility with changes in the underlying asset. We achieve this by applying Principal Components Analysis on the changes in implied volatilities over time, for fixed ranges of days to maturity and in two different metrics: the strike and the moneyness metric. In contrast to earlier papers in the interest rate literature, we decide on how many principal components explain the implied volatilities dynamics, not by using rules of thumb, but by using Velicer's non-parametric criterion. Subsequently we use a ''Procrustes'' type rotation in order to interpret the retained components. The retained rotated principal components are used for the calculation of the correlation coefficients. We find similar results in both metrics regarding the number and shape of shocks. Two principal components explain the dynamics of smiles. After the rotation the first one is interpreted as shift and the second one has a Z-shape. The correlations for the first principal component depend metric, while for the second are positive under both metrics.
Book Synopsis Volatility and Correlation by : Riccardo Rebonato
Download or read book Volatility and Correlation written by Riccardo Rebonato and published by John Wiley & Sons. This book was released on 2005-07-08 with total page 864 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Volatility and Correlation 2nd edition: The Perfect Hedger and the Fox, Rebonato looks at derivatives pricing from the angle of volatility and correlation. With both practical and theoretical applications, this is a thorough update of the highly successful Volatility & Correlation – with over 80% new or fully reworked material and is a must have both for practitioners and for students. The new and updated material includes a critical examination of the ‘perfect-replication’ approach to derivatives pricing, with special attention given to exotic options; a thorough analysis of the role of quadratic variation in derivatives pricing and hedging; a discussion of the informational efficiency of markets in commonly-used calibration and hedging practices. Treatment of new models including Variance Gamma, displaced diffusion, stochastic volatility for interest-rate smiles and equity/FX options. The book is split into four parts. Part I deals with a Black world without smiles, sets out the author’s ‘philosophical’ approach and covers deterministic volatility. Part II looks at smiles in equity and FX worlds. It begins with a review of relevant empirical information about smiles, and provides coverage of local-stochastic-volatility, general-stochastic-volatility, jump-diffusion and Variance-Gamma processes. Part II concludes with an important chapter that discusses if and to what extent one can dispense with an explicit specification of a model, and can directly prescribe the dynamics of the smile surface. Part III focusses on interest rates when the volatility is deterministic. Part IV extends this setting in order to account for smiles in a financially motivated and computationally tractable manner. In this final part the author deals with CEV processes, with diffusive stochastic volatility and with Markov-chain processes. Praise for the First Edition: “In this book, Dr Rebonato brings his penetrating eye to bear on option pricing and hedging.... The book is a must-read for those who already know the basics of options and are looking for an edge in applying the more sophisticated approaches that have recently been developed.” —Professor Ian Cooper, London Business School “Volatility and correlation are at the very core of all option pricing and hedging. In this book, Riccardo Rebonato presents the subject in his characteristically elegant and simple fashion...A rare combination of intellectual insight and practical common sense.” —Anthony Neuberger, London Business School
Book Synopsis Modeling Derivatives in C++ by : Justin London
Download or read book Modeling Derivatives in C++ written by Justin London and published by John Wiley & Sons. This book was released on 2005-01-21 with total page 922 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is the definitive and most comprehensive guide to modeling derivatives in C++ today. Providing readers with not only the theory and math behind the models, as well as the fundamental concepts of financial engineering, but also actual robust object-oriented C++ code, this is a practical introduction to the most important derivative models used in practice today, including equity (standard and exotics including barrier, lookback, and Asian) and fixed income (bonds, caps, swaptions, swaps, credit) derivatives. The book provides complete C++ implementations for many of the most important derivatives and interest rate pricing models used on Wall Street including Hull-White, BDT, CIR, HJM, and LIBOR Market Model. London illustrates the practical and efficient implementations of these models in real-world situations and discusses the mathematical underpinnings and derivation of the models in a detailed yet accessible manner illustrated by many examples with numerical data as well as real market data. A companion CD contains quantitative libraries, tools, applications, and resources that will be of value to those doing quantitative programming and analysis in C++. Filled with practical advice and helpful tools, Modeling Derivatives in C++ will help readers succeed in understanding and implementing C++ when modeling all types of derivatives.
Book Synopsis The Dynamics of the S&P 500 Implied Volatility Surface by : George S. Skiadopoulos
Download or read book The Dynamics of the S&P 500 Implied Volatility Surface written by George S. Skiadopoulos and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This empirical study is motivated by the literature on quot;smile-consistentquot; arbitrage pricing with stochastic volatility. We investigate the number and shape of shocks that move implied volatility smiles and surfaces by applying Principal Components Analysis. Two components are identified under a variety of criteria. Subsequently, we develop a quot;Procrustesquot; type rotation in order to interpret the retained components. The results have implications for both option pricing and hedging and for the economics of option pricing.
Book Synopsis Modern Pricing of Interest-Rate Derivatives by : Riccardo Rebonato
Download or read book Modern Pricing of Interest-Rate Derivatives written by Riccardo Rebonato and published by Princeton University Press. This book was released on 2012-01-16 with total page 486 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, interest-rate modeling has developed rapidly in terms of both practice and theory. The academic and practitioners' communities, however, have not always communicated as productively as would have been desirable. As a result, their research programs have often developed with little constructive interference. In this book, Riccardo Rebonato draws on his academic and professional experience, straddling both sides of the divide to bring together and build on what theory and trading have to offer. Rebonato begins by presenting the conceptual foundations for the application of the LIBOR market model to the pricing of interest-rate derivatives. Next he treats in great detail the calibration of this model to market prices, asking how possible and advisable it is to enforce a simultaneous fitting to several market observables. He does so with an eye not only to mathematical feasibility but also to financial justification, while devoting special scrutiny to the implications of market incompleteness. Much of the book concerns an original extension of the LIBOR market model, devised to account for implied volatility smiles. This is done by introducing a stochastic-volatility, displaced-diffusion version of the model. The emphasis again is on the financial justification and on the computational feasibility of the proposed solution to the smile problem. This book is must reading for quantitative researchers in financial houses, sophisticated practitioners in the derivatives area, and students of finance.
Book Synopsis Modeling the Dynamics of Implied Volatility Surfaces by : Ihsan Badshah
Download or read book Modeling the Dynamics of Implied Volatility Surfaces written by Ihsan Badshah and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this study is to model implied volatility surfaces and identify risk factors that account for most of the randomness in the volatility surfaces. The approach is similar to that of the Dumas, Fleming and Whaley (DFW) (1998) study. We use moneyness in implied forward price and out-of-the-money put-call options on the FTSE 100 stock index. After adjustments, a nonlinear parametric optimization technique is used to estimate different DFW models to characterize and produce smooth implied volatility surfaces. Next, principal component analysis is applied to the implied volatility surfaces to extract principal components that account for most of the dynamics in the shape of the surfaces. We then estimate and obtain smooth implied volatility surfaces with the parametric models that account for both smirk(skew) and time to maturity. We find the constant volatility model fails to explain the variations in the surfaces. However, the first three principal components (or factors) can explain about 69-88% of the variances in the implied volatility surfaces: in which on average 56% explains by the level factor, 15% by the term structure factor, and additional 7% by the jump-fear factor. The applications of our study can be in options trading, hedging of derivatives positions, risk management of options, and policy making.
Download or read book Biodiversity written by Wilhelm Barthlott and published by Springer Science & Business Media. This book was released on 1998 with total page 862 pages. Available in PDF, EPUB and Kindle. Book excerpt: The preservation of biodiversity is an essential part of the global concept for sustainable development. Ecologically and socially acceptable management of biodiversity is a prerequisite for the preservation of the wealth and productivity of natural ecological systems, and maintainance of the cultural differences in the relationship between man and nature. The Agenda 21 adopted at the Rio Summit in 1992 calls for concerted action by governments, governmental and non-governmental organizations, and the scientific community for the preservation of biodiversity.
Book Synopsis Financial Engineering, E-commerce and Supply Chain by : Panos M. Pardalos
Download or read book Financial Engineering, E-commerce and Supply Chain written by Panos M. Pardalos and published by Springer Science & Business Media. This book was released on 2013-06-29 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the fast growing elements of the Internet is electronic commerce, which refers to the use of electronic means to conduct business transactions within or across business entities. Nearly 80 percent of all Fortune 500 companies have been doing their core business through the Internet. Many issues, and societal implications of electronic commerce, are the subjects of recent research. A supply chain consists of all the entities and activities that enable the production, distribution, and delivery of products and services to consumers. Research in designing and managing supply chains has rapidly expanded during the last decade. In addition, increased and accessible computing power and modeling capabilities have spurred this growth, enabling researchers to simultaneously consider the many interrelated variables and decisions of a supply chain in a single tractable model.
Book Synopsis The Dynamics of Implied Volatility Surfaces by : Les Clewlow
Download or read book The Dynamics of Implied Volatility Surfaces written by Les Clewlow and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by the papers of Dupire (1992) and Derman and Kani (1997), we want to investigate the number of shocks that move the whole implied volatility surface, their interpretation and their correlation with percentage changes in the underlying asset. This work differs from Skiadopoulos, Hodges and Clewlow (1998) in which they looked at the dynamics of smiles for a given maturity bucket. We look at daily changes in implied volatilities under two different metrics: the strike metric and the moneyness metric. Since we are dealing with a three dimensional problem, we fix ranges of days to maturity, we pool them together and we apply the Principal Components Analysis (PCA) to the changes in implied volatilities over time across both the strike (moneyness) metric and the pooled ranges of days to maturity. We find similar results for both metrics. Two shocks explain the movements of the volatility surface, the first shock being interpreted as a shift, while the second one has a Z-shape. The sign of the correlation of the first shock with percentage changes in the underlying asset depends on the metric that we look at, while the sign is positive under both metrics regarding the second shock. The results suggest that the number of shocks, their interpretation and the sign of their correlation with changes in the underlying asset is the same for the whole implied volatility surface as it is for the smile corresponding to a fixed maturity bucket.
Book Synopsis Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments by : Carol Alexander
Download or read book Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments written by Carol Alexander and published by John Wiley & Sons. This book was released on 2008-06-09 with total page 427 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by leading market risk academic, Professor Carol Alexander, Pricing, Hedging and Trading Financial Instruments forms part three of the Market Risk Analysis four volume set. This book is an in-depth, practical and accessible guide to the models that are used for pricing and the strategies that are used for hedging financial instruments, and to the markets in which they trade. It provides a comprehensive, rigorous and accessible introduction to bonds, swaps, futures and forwards and options, including variance swaps, volatility indices and their futures and options, to stochastic volatility models and to modelling the implied and local volatility surfaces. All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the the accompanying CD-ROM . Empirical examples and case studies specific to this volume include: Duration-Convexity approximation to bond portfolios, and portfolio immunization; Pricing floaters and vanilla, basis and variance swaps; Coupon stripping and yield curve fitting; Proxy hedging, and hedging international securities and energy futures portfolios; Pricing models for European exotics, including barriers, Asians, look-backs, choosers, capped, contingent, power, quanto, compo, exchange, ‘best-of’ and spread options; Libor model calibration; Dynamic models for implied volatility based on principal component analysis; Calibration of stochastic volatility models (Matlab code); Simulations from stochastic volatility and jump models; Duration, PV01 and volatility invariant cash flow mappings; Delta-gamma-theta-vega mappings for options portfolios; Volatility beta mapping to volatility indices.
Download or read book Proceedings written by and published by . This book was released on 2004 with total page 592 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Concepts and Practice of Mathematical Finance by : Mark Suresh Joshi
Download or read book The Concepts and Practice of Mathematical Finance written by Mark Suresh Joshi and published by Cambridge University Press. This book was released on 2003-12-24 with total page 496 pages. Available in PDF, EPUB and Kindle. Book excerpt: For those starting out as practitioners of mathematical finance, this is an ideal introduction. It provides the reader with a clear understanding of the intuition behind derivatives pricing, how models are implemented, and how they are used and adapted in practice. Strengths and weaknesses of different models, e.g. Black-Scholes, stochastic volatility, jump-diffusion and variance gamma, are examined. Both the theory and the implementation of the industry-standard LIBOR market model are considered in detail. Uniquely, the book includes extensive discussion of the ideas behind the models, and is even-handed in examining various approaches to the subject. Thus each pricing problem is solved using several methods. Worked examples and exercises, with answers, are provided in plenty, and computer projects are given for many problems. The author brings to this book a blend of practical experience and rigorous mathematical background, and supplies here the working knowledge needed to become a good quantitative analyst.
Download or read book Risk written by and published by . This book was released on 2002 with total page 678 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Two Unconditionally Implied Parameters and Volatility Smiles and Skews by : Nikolai Dokuchaev
Download or read book Two Unconditionally Implied Parameters and Volatility Smiles and Skews written by Nikolai Dokuchaev and published by . This book was released on 2004 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: The standard implied volatility definition presents its value as an implicit function of several parameters, including the risk-free interest rate. This approach ignores the fact that, in reality, the risk free interest rate is unknown and need to be forecasted, because the option price depends on its future curve. Therefore, the standard implied volatility is a conditional: it depends on the future values of the risk free rate. Instead, we suggest to calculate two implied parameters: the implied volatility and the implied average cumulative risk free interest rate. They can be found unconditionally from a system of two equations. We found that very simple models with random volatilities (for instance, with two point distributions) allow to generate various volatility smiles and skews with this approach.
Book Synopsis Decision Making: Recent Developments and Worldwide Applications by : Stelios H. Zanakis
Download or read book Decision Making: Recent Developments and Worldwide Applications written by Stelios H. Zanakis and published by Springer Science & Business Media. This book was released on 2013-04-17 with total page 484 pages. Available in PDF, EPUB and Kindle. Book excerpt: This chapter describes a study conducted at the Swinburne University of Technology in Australia, in their School of Business. The study was to explore the applicability of a judgment-analytic decision support system to the assessment of the likelihood of an applicant being selected for admission to the School's Graduate Certificate in Business Administration (GCBA) program. The likelihood of a program administrator selecting a particular applicant is directly linked to the assessment of the likelihood of that applicant's success in the GCBA program. The purpose of this study, in effect, was to analyze the administrative judgment process in assessment of an applicant's likelihood of success in the program. THE PROCESS OF HUMAN JUDGMENT Human judgment is a process through which an individual uses social infonnation to make decisions. The social infonnation is obtained from an individual's environment and is interpreted through the individual's cognitive image of the environment. The. cognitive image provides a representation of the environment based on past experiences and training, and essentially predisposes the person to respond to social infonnation in predictable ways. An individual's policies or beliefs about the environment represent these patterns. Human judgments are based then upon one's interpretation of available infonnation. They are probability statements about one's environment and how one reacts to it. This condition leads to the human judgment process being inherently limited. It is fundamentally a covert process. It is seldom possible for an individual to accurately describe his or her judgment process accurately.
Book Synopsis Trading Volatility by : Colin Bennett
Download or read book Trading Volatility written by Colin Bennett and published by . This book was released on 2014-08-17 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt: This publication aims to fill the void between books providing an introduction to derivatives, and advanced books whose target audience are members of quantitative modelling community. In order to appeal to the widest audience, this publication tries to assume the least amount of prior knowledge. The content quickly moves onto more advanced subjects in order to concentrate on more practical and advanced topics. "A master piece to learn in a nutshell all the essentials about volatility with a practical and lively approach. A must read!" Carole Bernard, Equity Derivatives Specialist at Bloomberg "This book could be seen as the 'volatility bible'!" Markus-Alexander Flesch, Head of Sales & Marketing at Eurex "I highly recommend this book both for those new to the equity derivatives business, and for more advanced readers. The balance between theory and practice is struck At-The-Money" Paul Stephens, Head of Institutional Marketing at CBOE "One of the best resources out there for the volatility community" Paul Britton, CEO and Founder of Capstone Investment Advisors "Colin has managed to convey often complex derivative and volatility concepts with an admirable simplicity, a welcome change from the all-too-dense tomes one usually finds on the subject" Edmund Shing PhD, former Proprietary Trader at BNP Paribas "In a crowded space, Colin has supplied a useful and concise guide" Gary Delany, Director Europe at the Options Industry Council
