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Some Economically Meaningful Option Model Calibration Performance Measures
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Book Synopsis Some Economically Meaningful Option Model Calibration Performance Measures by : Craig A. Friedman
Download or read book Some Economically Meaningful Option Model Calibration Performance Measures written by Craig A. Friedman and published by . This book was released on 2014 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: The desire to more accurately calibrate option pricing models to liquid option prices has been an important driver of the growth of the option pricing literature and practice. However, the most commonly used model calibration accuracy metrics are not designed to reflect the economic consequences of trading based on model prices. To address this shortcoming, we derive, from first principles, in an idealized market setting, new, tractable, and economically meaningful, utility-based, measures of option pricing model calibration performance. We show that when pricing errors are “small,” our measures closely approximate popular percentage pricing error-based metrics. However, our measures can be quite different when model prices are smaller than they ought to be (which can happen when the option pricing model does not properly take into account fat-tailed asset return effects). We compare our measures with widely used metrics and show, via examples using SPX options data, that our new measures better inform us about the economic consequences of model pricing error and thereby better allow us to select among candidate option pricing models.
Book Synopsis Topics on Option Valuation and Model Calibration by :
Download or read book Topics on Option Valuation and Model Calibration written by and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Specification Tests of Calibrated Option Pricing Models by : Robert A. Jarrow
Download or read book Specification Tests of Calibrated Option Pricing Models written by Robert A. Jarrow and published by . This book was released on 2013 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: In spite of the popularity of model calibration in finance, empirical researchers have put more emphasis on model estimation than on the equally important goodness-of-fit problem. This is due partly to the ignorance of modelers, and more to the ability of existing statistical tests to detect specification errors. In practice, models are often calibrated by minimizing the sum of squared difference between the modelled and actual observations. It is challenging to disentangle model error from estimation error in the residual series. To circumvent the difficulty, we study an alternative way of estimating the model by exact calibration. We argue that standard time series tests based on the exact approach can better reveal model misspecifications than the error minimizing approach. In the context of option pricing, we illustrate the usefulness of exact calibration in detecting model misspecification. Under heteroskedastic observation error structure, our simulation results shows that the Black-Scholes model calibrated by exact approach delivers more accurate hedging performance than that calibrated by error minimization.
Book Synopsis Explanatory Model Analysis by : Przemyslaw Biecek
Download or read book Explanatory Model Analysis written by Przemyslaw Biecek and published by CRC Press. This book was released on 2021-02-15 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: Explanatory Model Analysis Explore, Explain and Examine Predictive Models is a set of methods and tools designed to build better predictive models and to monitor their behaviour in a changing environment. Today, the true bottleneck in predictive modelling is neither the lack of data, nor the lack of computational power, nor inadequate algorithms, nor the lack of flexible models. It is the lack of tools for model exploration (extraction of relationships learned by the model), model explanation (understanding the key factors influencing model decisions) and model examination (identification of model weaknesses and evaluation of model's performance). This book presents a collection of model agnostic methods that may be used for any black-box model together with real-world applications to classification and regression problems.
Book Synopsis Local Vs. Global Calibration - A Comparison of Option Hedging Strategies and Option Pricing Models by : Stefanie Hasse
Download or read book Local Vs. Global Calibration - A Comparison of Option Hedging Strategies and Option Pricing Models written by Stefanie Hasse and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the empirical relationship of model fit, calibration methods and hedging performance for individual equity options. The sample used comprises of about 76,000 option prices for individual equity options recorded between January 2, 2008 and December 31, 2009. This sample has been used to first calibrate the stochastic volatility model by Heston (1993) by using two different calibration techniques, local and global calibration, and then to investigate hedging performance of the Heston model versus three simple adjustments to the model by Black and Scholes (1973) (BSM). It is found that the sticky-strike adjustment to the BSM outperforms the Heston model for delta and delta-gamma hedging of individual equity options, and the Heston model using parameters from local calibration performs best for delta-vega hedges. The results apply to both daily and weekly rebalancing of the hedging portfolios and are robust with respect to different moneyness categories and market regimes.
Book Synopsis Calibration Risk for Exotic Options by : Kai Detlefsen
Download or read book Calibration Risk for Exotic Options written by Kai Detlefsen and published by . This book was released on 2017 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Option pricing models are calibrated to market data of plain vanillas by minimization of an error functional. From the economic viewpoint, there are several possibilities to measure the error between the market and the model. These different specifications of the error give rise to different sets of calibrated model parameters and the resulting prices of exotic options vary significantly. These price differences often exceed the usual profit margin of exotic options.We provide evidence for this calibration risk in a time series of DAX implied volatility surfaces from April 2003 to March 2004. We analyze in the Heston and in the Bates model factors influencing these price differences of exotic options and finally recommend an error functional. Moreover, we determine the model risk of these two stochastic volatility models for the time series and consider its relation to calibration risk.
Book Synopsis Advances in Intelligent Data Analysis XVIII by : Michael R. Berthold
Download or read book Advances in Intelligent Data Analysis XVIII written by Michael R. Berthold and published by Springer. This book was released on 2020-04-02 with total page 588 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book constitutes the proceedings of the 18th International Conference on Intelligent Data Analysis, IDA 2020, held in Konstanz, Germany, in April 2020. The 45 full papers presented in this volume were carefully reviewed and selected from 114 submissions. Advancing Intelligent Data Analysis requires novel, potentially game-changing ideas. IDA’s mission is to promote ideas over performance: a solid motivation can be as convincing as exhaustive empirical evaluation.
Book Synopsis Credit Risk Management by : Tony Van Gestel
Download or read book Credit Risk Management written by Tony Van Gestel and published by Oxford University Press. This book was released on 2009 with total page 552 pages. Available in PDF, EPUB and Kindle. Book excerpt: This first of three volumes on credit risk management, providing a thorough introduction to financial risk management and modelling.
Book Synopsis Fundamentals of Clinical Data Science by : Pieter Kubben
Download or read book Fundamentals of Clinical Data Science written by Pieter Kubben and published by Springer. This book was released on 2018-12-21 with total page 219 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book comprehensively covers the fundamentals of clinical data science, focusing on data collection, modelling and clinical applications. Topics covered in the first section on data collection include: data sources, data at scale (big data), data stewardship (FAIR data) and related privacy concerns. Aspects of predictive modelling using techniques such as classification, regression or clustering, and prediction model validation will be covered in the second section. The third section covers aspects of (mobile) clinical decision support systems, operational excellence and value-based healthcare. Fundamentals of Clinical Data Science is an essential resource for healthcare professionals and IT consultants intending to develop and refine their skills in personalized medicine, using solutions based on large datasets from electronic health records or telemonitoring programmes. The book’s promise is “no math, no code”and will explain the topics in a style that is optimized for a healthcare audience.
Book Synopsis Real Business Cycles by : James Hartley
Download or read book Real Business Cycles written by James Hartley and published by Routledge. This book was released on 2013-07-04 with total page 690 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real Business Cycle theory combines the remains of monetarism with the new classical macroeconomics, and has become one of the dominant approaches within contemporary macroeconomics today. This volume presents: * the authoritative anthology in RBC. The work contains the major articles introducing and extending the theory as well as critical literature * an extensive introduction which contains an expository summary and critical evaluation of RBC theory * comprehensive coverage and balance between seminal papers and extensions; proponents and critics; and theory and empirics. Macroeconomics is a compulsory element in most economics courses, and this book will be an essential guide to one of its major theories.
Download or read book Standard & Poor's Creditweek written by and published by . This book was released on 2010 with total page 966 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Algorithms for Minimization Without Derivatives by : Richard P. Brent
Download or read book Algorithms for Minimization Without Derivatives written by Richard P. Brent and published by Courier Corporation. This book was released on 2013-06-10 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: DIVOutstanding text for graduate students and research workers proposes improvements to existing algorithms, extends their related mathematical theories, and offers details on new algorithms for approximating local and global minima. /div
Book Synopsis Multivariate Statistical Machine Learning Methods for Genomic Prediction by : Osval Antonio Montesinos López
Download or read book Multivariate Statistical Machine Learning Methods for Genomic Prediction written by Osval Antonio Montesinos López and published by Springer Nature. This book was released on 2022-02-14 with total page 707 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is open access under a CC BY 4.0 license This open access book brings together the latest genome base prediction models currently being used by statisticians, breeders and data scientists. It provides an accessible way to understand the theory behind each statistical learning tool, the required pre-processing, the basics of model building, how to train statistical learning methods, the basic R scripts needed to implement each statistical learning tool, and the output of each tool. To do so, for each tool the book provides background theory, some elements of the R statistical software for its implementation, the conceptual underpinnings, and at least two illustrative examples with data from real-world genomic selection experiments. Lastly, worked-out examples help readers check their own comprehension.The book will greatly appeal to readers in plant (and animal) breeding, geneticists and statisticians, as it provides in a very accessible way the necessary theory, the appropriate R code, and illustrative examples for a complete understanding of each statistical learning tool. In addition, it weighs the advantages and disadvantages of each tool.
Book Synopsis FHWA Nationally Coordinated Program of Highway Research, Development, and Technology. Progress Report. 1989 by :
Download or read book FHWA Nationally Coordinated Program of Highway Research, Development, and Technology. Progress Report. 1989 written by and published by . This book was released on 1989 with total page 124 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Evidence-based Medicine to Inform Practice: Assessing Clinical Effectiveness and Economic Burden of Medicine by : Kevin Lu
Download or read book Evidence-based Medicine to Inform Practice: Assessing Clinical Effectiveness and Economic Burden of Medicine written by Kevin Lu and published by Frontiers Media SA. This book was released on 2022-03-08 with total page 484 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Emerging Applications of Cellular Automata by : Alejandro Salcido
Download or read book Emerging Applications of Cellular Automata written by Alejandro Salcido and published by BoD – Books on Demand. This book was released on 2013-05-08 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: Cellular automata have become a core subject in the sciences of complexity due to their conceptual simplicity, easiness of implementation for computer simulation, and ability to exhibit a wide variety of amazingly complex behavior. These features of cellular automata have attracted the researchers attention from a wide range of divergent fields of science. In this book, six outstanding emerging cellular automata applications have been compiled. These contributions underline the versatility of cellular automata as models for a wide diversity of complex systems. We hope that, after reading the outstanding contributions compiled in this book, we will have succeeded in bringing across what engineers and scientists are now doing about the application of cellular automata for solving practical problems in diverse disciplines. We also hope that this book will have been to your interest and liking. Lastly, we would like to thank all the authors for their excellent contributions in the different topics of cellular automata covered in this book.
Book Synopsis Natural Catastrophe Risk Management and Modelling by : Kirsten Mitchell-Wallace
Download or read book Natural Catastrophe Risk Management and Modelling written by Kirsten Mitchell-Wallace and published by John Wiley & Sons. This book was released on 2017-04-24 with total page 473 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book covers both the practical and theoretical aspects of catastrophe modelling for insurance industry practitioners and public policymakers. Written by authors with both academic and industry experience it also functions as an excellent graduate-level text and overview of the field. Ours is a time of unprecedented levels of risk from both natural and anthropogenic sources. Fortunately, it is also an era of relatively inexpensive technologies for use in assessing those risks. The demand from both commercial and public interests—including (re)insurers, NGOs, global disaster management agencies, and local authorities—for sophisticated catastrophe risk assessment tools has never been greater, and contemporary catastrophe modelling satisfies that demand. Combining the latest research with detailed coverage of state-of-the-art catastrophe modelling techniques and technologies, this book delivers the knowledge needed to use, interpret, and build catastrophe models, and provides greater insight into catastrophe modelling’s enormous potential and possible limitations. The first book containing the detailed, practical knowledge needed to support practitioners as effective catastrophe risk modellers and managers Includes hazard, vulnerability and financial material to provide the only independent, comprehensive overview of the subject, accessible to students and practitioners alike Demonstrates the relevance of catastrophe models within a practical, decision-making framework and illustrates their many applications Includes contributions from many of the top names in the field, globally, from industry, academia, and government Natural Catastrophe Risk Management and Modelling: A Practitioner’s Guide is an important working resource for catastrophe modelling analysts and developers, actuaries, underwriters, and those working in compliance or regulatory functions related to catastrophe risk. It is also valuable for scientists and engineers seeking to gain greater insight into catastrophe risk management and its applications.
