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Assessing The Quality Of Volatility Estimators Via Option Pricing
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Book Synopsis Assessing the Quality of Volatility Estimators Via Option Pricing by : Simona Sanfelici
Download or read book Assessing the Quality of Volatility Estimators Via Option Pricing written by Simona Sanfelici and published by . This book was released on 2013 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this paper is to measure and assess the accuracy of different volatility estimators based on high frequency data in an option pricing context. For this, we use a discrete-time stochastic volatility model based on Auto-Regressive-Gamma (ARG) dynamics for the volatility.First, ARG processes are presented both under historical and risk-neutral measure, in an affine stochastic discount factor framework. The model parameters are estimated exploiting the informative content of historical high frequency data. Secondly, option pricing is performed via Monte Carlo techniques. This framework allows us to measure the quality of different volatility estimators in terms of mispricing with respect to real option data, leaving to the ARG volatility model the role of a tool. Our analysis points out that using high frequency intra-day returns allows to obtain more accurate ex post estimation of the true (unobservable) return variation than do the more traditional sample variances based on daily returns, and this is reflected in the quality of pricing. Moreover, estimators robust to microstructure effects show an improvement over the realized volatility estimator. The empirical analysis is conducted on European options written on S&P500 index.
Book Synopsis Volatility Estimation Techniques in the Pricing of Derivative Contracts by : Emilie Drop
Download or read book Volatility Estimation Techniques in the Pricing of Derivative Contracts written by Emilie Drop and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this paper is to evaluate how different volatility estimation techniques impact the quality of pricing option contracts. The theoretical part explains option pricing, qualitative and quantitative parameters of the Black Scholes model, and implied volatility features. The pricing performance of the Black Scholes model with historical volatilities and of the ad hoc Black Scholes model with implied volatilities are assessed with Matlab, using a real option dataset consisting of S & P 500 call options. Moreover, the specification of the regression structure used in the ad hoc Black Scholes model to estimate volatility is analysed. It is shown that the absolute smile regression structure using strike price, time to maturity and their com- bination as independent variables for one-day ahead out of sample pricing is the most accurate technique for pricing options out of all the methods considered.
Book Synopsis Evaluating Volatility Forecasts in Option Pricing in the Context of a Simulated Options Market by : Evdokia Xekalaki
Download or read book Evaluating Volatility Forecasts in Option Pricing in the Context of a Simulated Options Market written by Evdokia Xekalaki and published by . This book was released on 2005 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: The performance of an ARCH model selection algorithm based on the standardized prediction error criterion (SPEC) is evaluated. The evaluation of the algorithm is performed by comparing different volatility forecasts in option pricing through the simulation of an options market. Traders employing the SPEC model selection algorithm use the model with the lowest sum of squared standardized one-step-ahead prediction errors for obtaining their volatility forecast. The cumulative profits of the participants in pricing one-day index straddle options always using variance forecasts obtained by GARCH, EGARCH and TARCH models are compared to those made by the participants using variance forecasts obtained by models suggested by the SPEC algorithm. The straddles are priced on the Standard and Poor 500 (Samp;P500) index. It is concluded that traders, who base their selection of an ARCH model on the SPEC algorithm, achieve higher profits than those, who use only a single ARCH model. Moreover, the SPEC algorithm is compared with other criteria of model selection that measure the ability of the ARCH models to forecast the realized intra-day volatility. In this case too, the SPEC algorithm users achieve the highest returns. Thus, the SPEC model selection method appears to be a useful tool in selecting the appropriate model for estimating future volatility in pricing derivatives.
Book Synopsis Estimating Volatility Levels for Option Pricing by :
Download or read book Estimating Volatility Levels for Option Pricing written by and published by . This book was released on 1997 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Estimating Volatility and Dividend Yield When Valuing Real Options to Invest or Abandon by : Graham A. Davis
Download or read book Estimating Volatility and Dividend Yield When Valuing Real Options to Invest or Abandon written by Graham A. Davis and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The opportunity to invest in or abandon a project can in principle be valued using real options techniques. In practice, option pricing has as inputs the volatility and dividend yield of the project, which are in most cases not observable via market data. Current methods of estimating these parameters are largely ad hoc, introducing potential error into the valuation process. This paper uses simple production models to formalize concepts for estimating project volatility and dividend yield in single stochastic variable option models, and provides an example of how these estimates can be used in a real option valuation exercise.
Book Synopsis Volatility Estimation and Option Pricing by : Jian Zou
Download or read book Volatility Estimation and Option Pricing written by Jian Zou and published by . This book was released on 2009 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Estimating and Using GARCH Models with VIX Data for Option Valuation by : Juho Kanniainen
Download or read book Estimating and Using GARCH Models with VIX Data for Option Valuation written by Juho Kanniainen and published by . This book was released on 2016 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses information on VIX to improve the empirical performance of GARCH models for pricing options on the S&P 500. In pricing multiple cross-sections of options, the models' performance can clearly be improved by extracting daily spot volatilities from the series of VIX rather than by linking spot volatility with different dates by using the series of the underlying's returns. Moreover, in contrast to traditional returns-based maximum likelihood estimation (MLE), a joint MLE with returns and VIX improves option pricing performance, and for NGARCH, joint MLE can yield empirically almost the same out-of-sample option pricing performance as direct calibration does to in-sample options, but without costly computations. Finally, consistently with the existing research, this paper finds that non-affine models clearly outperform affine models.
Book Synopsis Estimating Risk Premia and Volatility by : Chitranjan Sinha
Download or read book Estimating Risk Premia and Volatility written by Chitranjan Sinha and published by . This book was released on 1997 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Volatility Forecasts by : I-Ming Jiang
Download or read book Volatility Forecasts written by I-Ming Jiang and published by . This book was released on 2013 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the volatility forecasting abilities of return-based and range-based estimators for two stock indices and two individual stocks in the U.S. stock market. The forecasting performances are evaluated by two robust statistical loss functions, and further by financial applications in risk management and option pricing. Consistent with previous studies, the range-based volatility forecasts outperform in terms of statistical evaluation, Value-at-Risk calculation, and option pricing. However, return-based volatility forecasts prove superior in the evaluation of market risk capital requirements.
Book Synopsis Estimating the Volatility in Traditional Option Valuation Models by : Tetsuji Takeuchi
Download or read book Estimating the Volatility in Traditional Option Valuation Models written by Tetsuji Takeuchi and published by . This book was released on 1993 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Improving Volatility Estimation and Options Hedging by :
Download or read book Improving Volatility Estimation and Options Hedging written by and published by . This book was released on 2001 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Volatility Estimation and Option Pricing with Fractional Brownian Motion by : Daniel O. Cajueiro
Download or read book Volatility Estimation and Option Pricing with Fractional Brownian Motion written by Daniel O. Cajueiro and published by . This book was released on 2005 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the estimation of volatility using the Fractional Brownian Motion (FBM) to model asset returns. Then, we price some European options using a Black-Scholes type formula derived for the FBM market model.
Download or read book Volatility written by Robert A. Jarrow and published by Risk Publications. This book was released on 1998 with total page 476 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by a number of authors, this text is aimed at market practitioners and applies the latest stochastic volatility research findings to the analysis of stock prices. It includes commentary and analysis based on real-life situations.
Book Synopsis Analysing Intraday Implied Volatility for Pricing Currency Options by : Thi Le
Download or read book Analysing Intraday Implied Volatility for Pricing Currency Options written by Thi Le and published by Springer Nature. This book was released on 2021-04-13 with total page 350 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on the impact of high-frequency data in forecasting market volatility and options price. New technologies have created opportunities to obtain better, faster, and more efficient datasets to explore financial market phenomena at the most acceptable data levels. It provides reliable intraday data supporting financial investment decisions across different assets classes and instruments consisting of commodities, derivatives, equities, fixed income and foreign exchange. This book emphasises four key areas, (1) estimating intraday implied volatility using ultra-high frequency (5-minutes frequency) currency options to capture traders' trading behaviour, (2) computing realised volatility based on 5-minute frequency currency price to obtain speculators' speculation attitude, (3) examining the ability of implied volatility to subsume market information through forecasting realised volatility and (4) evaluating the predictive power of implied volatility for pricing currency options. This is a must-read for academics and professionals who want to improve their skills and outcomes in trading options.
Book Synopsis Agricultural Markets Instability by : Alberto Garrido
Download or read book Agricultural Markets Instability written by Alberto Garrido and published by Routledge. This book was released on 2016-01-08 with total page 227 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the financial and food price crises of 2007, market instability has been a topic of major concern to agricultural economists and policy professionals. This volume provides an overview of the key issues surrounding food prices volatility, focusing primarily on drivers, long-term implications of volatility and its impacts on food chains and consumers. The book explores which factors and drivers are volatility-increasing and which others are price level-increasing, and whether these two distinctive effects can be identified and measured. It considers the extent to which increasing instability affects agents in the value chain, as well as the actual impacts on the most vulnerable households in the EU and in selected developing countries. It also analyses which policies are more effective to avert and mitigate the effects of instability. Developed from the work of the European-based ULYSSES project, the book synthesises the most recent literature on the topic and presents the views of practitioners, businesses, NGOs and farmers' organizations. It draws policy responses and recommendations for policy makers at both European and on international levels.
Book Synopsis Four Essays in Volatility Estimation and Option Pricing by : 束景虹
Download or read book Four Essays in Volatility Estimation and Option Pricing written by 束景虹 and published by . This book was released on 2002 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Numerical Methods for Volatility Estimation and Option Pricing by : Ibtissam Medarhri
Download or read book Numerical Methods for Volatility Estimation and Option Pricing written by Ibtissam Medarhri and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
