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Author: David S. Bates Publisher: ISBN: Category : Foreign exchange Languages : en Pages : 72
Book Description
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.
Author: David S. Bates Publisher: ISBN: Category : Foreign exchange Languages : en Pages : 72
Book Description
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.
Author: Riccardo Rebonato Publisher: John Wiley & Sons ISBN: 0470091401 Category : Business & Economics Languages : en Pages : 864
Book Description
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
Author: Luc Bauwens Publisher: John Wiley & Sons ISBN: 0470872519 Category : Business & Economics Languages : en Pages : 566
Book Description
A complete guide to the theory and practice of volatility models in financial engineering Volatility has become a hot topic in this era of instant communications, spawning a great deal of research in empirical finance and time series econometrics. Providing an overview of the most recent advances, Handbook of Volatility Models and Their Applications explores key concepts and topics essential for modeling the volatility of financial time series, both univariate and multivariate, parametric and non-parametric, high-frequency and low-frequency. Featuring contributions from international experts in the field, the book features numerous examples and applications from real-world projects and cutting-edge research, showing step by step how to use various methods accurately and efficiently when assessing volatility rates. Following a comprehensive introduction to the topic, readers are provided with three distinct sections that unify the statistical and practical aspects of volatility: Autoregressive Conditional Heteroskedasticity and Stochastic Volatility presents ARCH and stochastic volatility models, with a focus on recent research topics including mean, volatility, and skewness spillovers in equity markets Other Models and Methods presents alternative approaches, such as multiplicative error models, nonparametric and semi-parametric models, and copula-based models of (co)volatilities Realized Volatility explores issues of the measurement of volatility by realized variances and covariances, guiding readers on how to successfully model and forecast these measures Handbook of Volatility Models and Their Applications is an essential reference for academics and practitioners in finance, business, and econometrics who work with volatility models in their everyday work. The book also serves as a supplement for courses on risk management and volatility at the upper-undergraduate and graduate levels.
Author: Stephen J. Taylor Publisher: Princeton University Press ISBN: 1400839254 Category : Business & Economics Languages : en Pages : 544
Book Description
This book shows how current and recent market prices convey information about the probability distributions that govern future prices. Moving beyond purely theoretical models, Stephen Taylor applies methods supported by empirical research of equity and foreign exchange markets to show how daily and more frequent asset prices, and the prices of option contracts, can be used to construct and assess predictions about future prices, their volatility, and their probability distributions. Stephen Taylor provides a comprehensive introduction to the dynamic behavior of asset prices, relying on finance theory and statistical evidence. He uses stochastic processes to define mathematical models for price dynamics, but with less mathematics than in alternative texts. The key topics covered include random walk tests, trading rules, ARCH models, stochastic volatility models, high-frequency datasets, and the information that option prices imply about volatility and distributions. Asset Price Dynamics, Volatility, and Prediction is ideal for students of economics, finance, and mathematics who are studying financial econometrics, and will enable researchers to identify and apply appropriate models and methods. It will likewise be a valuable resource for quantitative analysts, fund managers, risk managers, and investors who seek realistic expectations about future asset prices and the risks to which they are exposed.
Author: Yacine Aït-Sahalia Publisher: Princeton University Press ISBN: 0691161437 Category : Business & Economics Languages : en Pages : 683
Book Description
A comprehensive introduction to the statistical and econometric methods for analyzing high-frequency financial data High-frequency trading is an algorithm-based computerized trading practice that allows firms to trade stocks in milliseconds. Over the last fifteen years, the use of statistical and econometric methods for analyzing high-frequency financial data has grown exponentially. This growth has been driven by the increasing availability of such data, the technological advancements that make high-frequency trading strategies possible, and the need of practitioners to analyze these data. This comprehensive book introduces readers to these emerging methods and tools of analysis. Yacine Aït-Sahalia and Jean Jacod cover the mathematical foundations of stochastic processes, describe the primary characteristics of high-frequency financial data, and present the asymptotic concepts that their analysis relies on. Aït-Sahalia and Jacod also deal with estimation of the volatility portion of the model, including methods that are robust to market microstructure noise, and address estimation and testing questions involving the jump part of the model. As they demonstrate, the practical importance and relevance of jumps in financial data are universally recognized, but only recently have econometric methods become available to rigorously analyze jump processes. Aït-Sahalia and Jacod approach high-frequency econometrics with a distinct focus on the financial side of matters while maintaining technical rigor, which makes this book invaluable to researchers and practitioners alike.
Author: Peter Tankov Publisher: CRC Press ISBN: 1135437947 Category : Business & Economics Languages : en Pages : 552
Book Description
WINNER of a Riskbook.com Best of 2004 Book Award! During the last decade, financial models based on jump processes have acquired increasing popularity in risk management and option pricing. Much has been published on the subject, but the technical nature of most papers makes them difficult for nonspecialists to understand, and the mathematic
Author: Publisher: Elsevier ISBN: 0128202513 Category : Mathematics Languages : en Pages : 352
Book Description
Financial, Macro and Micro Econometrics Using R, Volume 42, provides state-of-the-art information on important topics in econometrics, including multivariate GARCH, stochastic frontiers, fractional responses, specification testing and model selection, exogeneity testing, causal analysis and forecasting, GMM models, asset bubbles and crises, corporate investments, classification, forecasting, nonstandard problems, cointegration, financial market jumps and co-jumps, among other topics. - Presents chapters authored by distinguished, honored researchers who have received awards from the Journal of Econometrics or the Econometric Society - Includes descriptions and links to resources and free open source R - Gives readers what they need to jumpstart their understanding on the state-of-the-art
Author: Luc Bauwens Publisher: John Wiley & Sons ISBN: 1118272056 Category : Business & Economics Languages : en Pages : 566
Book Description
A complete guide to the theory and practice of volatility models in financial engineering Volatility has become a hot topic in this era of instant communications, spawning a great deal of research in empirical finance and time series econometrics. Providing an overview of the most recent advances, Handbook of Volatility Models and Their Applications explores key concepts and topics essential for modeling the volatility of financial time series, both univariate and multivariate, parametric and non-parametric, high-frequency and low-frequency. Featuring contributions from international experts in the field, the book features numerous examples and applications from real-world projects and cutting-edge research, showing step by step how to use various methods accurately and efficiently when assessing volatility rates. Following a comprehensive introduction to the topic, readers are provided with three distinct sections that unify the statistical and practical aspects of volatility: Autoregressive Conditional Heteroskedasticity and Stochastic Volatility presents ARCH and stochastic volatility models, with a focus on recent research topics including mean, volatility, and skewness spillovers in equity markets Other Models and Methods presents alternative approaches, such as multiplicative error models, nonparametric and semi-parametric models, and copula-based models of (co)volatilities Realized Volatility explores issues of the measurement of volatility by realized variances and covariances, guiding readers on how to successfully model and forecast these measures Handbook of Volatility Models and Their Applications is an essential reference for academics and practitioners in finance, business, and econometrics who work with volatility models in their everyday work. The book also serves as a supplement for courses on risk management and volatility at the upper-undergraduate and graduate levels.
Author: Sylvia Fruhwirth-Schnatter Publisher: CRC Press ISBN: 0429508247 Category : Computers Languages : en Pages : 522
Book Description
Mixture models have been around for over 150 years, and they are found in many branches of statistical modelling, as a versatile and multifaceted tool. They can be applied to a wide range of data: univariate or multivariate, continuous or categorical, cross-sectional, time series, networks, and much more. Mixture analysis is a very active research topic in statistics and machine learning, with new developments in methodology and applications taking place all the time. The Handbook of Mixture Analysis is a very timely publication, presenting a broad overview of the methods and applications of this important field of research. It covers a wide array of topics, including the EM algorithm, Bayesian mixture models, model-based clustering, high-dimensional data, hidden Markov models, and applications in finance, genomics, and astronomy. Features: Provides a comprehensive overview of the methods and applications of mixture modelling and analysis Divided into three parts: Foundations and Methods; Mixture Modelling and Extensions; and Selected Applications Contains many worked examples using real data, together with computational implementation, to illustrate the methods described Includes contributions from the leading researchers in the field The Handbook of Mixture Analysis is targeted at graduate students and young researchers new to the field. It will also be an important reference for anyone working in this field, whether they are developing new methodology, or applying the models to real scientific problems.
Author: Espen Gaarder Haug Publisher: John Wiley & Sons ISBN: 1118836820 Category : Business & Economics Languages : en Pages : 400
Book Description
Derivatives Models on Models takes a theoretical and practical look at some of the latest and most important ideas behind derivatives pricing models. In each chapter the author highlights the latest thinking and trends in the area. A wide range of topics are covered, including valuation methods on stocks paying discrete dividend, Asian options, American barrier options, Complex barrier options, reset options, and electricity derivatives. The book also discusses the latest ideas surrounding finance like the robustness of dynamic delta hedging, option hedging, negative probabilities and space-time finance. The accompanying CD-ROM with additional Excel sheets includes the mathematical models covered in the book. The book also includes interviews with some of the world’s top names in the industry, and an insight into the history behind some of the greatest discoveries in quantitative finance. Interviewees include: Clive Granger, Nobel Prize winner in Economics 2003, on Cointegration Nassim Taleb on Black Swans Stephen Ross on Arbitrage Pricing Theory Emanuel Derman the Wall Street Quant Edward Thorp on Gambling and Trading Peter Carr the Wall Street Wizard of Option Symmetry and Volatility Aaron Brown on Gambling, Poker and Trading David Bates on Crash and Jumps Andrei Khrennikov on Negative Probabilities Elie Ayache on Option Trading and Modeling Peter Jaeckel on Monte Carlo Simulation Alan Lewis on Stochastic Volatility and Jumps Paul Wilmott on Paul Wilmott Knut Aase on Catastrophes and Financial Economics Eduardo Schwartz the Yoga Master of Quantitative Finance Bruno Dupire on Local and Stochastic Volatility Models
Author: David S. Bates
Author: David S. Bates
Author: Riccardo Rebonato
Author: Luc Bauwens
Author: Stephen J. Taylor
Author: Yacine Aït-Sahalia
Author: Peter Tankov
Author: 
Author: Luc Bauwens
Author: Sylvia Fruhwirth-Schnatter
Author: Espen Gaarder Haug