منابع مشابه
Local volatility dynamic models
This paper is concerned with the characterization of arbitrage free dynamic stochastic models for the equity markets when Itô stochastic differential equations are used to model the dynamics of a set of basic instruments including, but not limited to, the underliers. We study these market models in the framework of the HJM philosophy originally articulated for Treasury bond markets. The approac...
متن کاملNew approximations in local volatility models
For general time-dependent local volatility models, we propose new approximation formulas for the price of call options. This extends previous results of [BGM10b] where stochastic expansions combined with Malliavin calculus were performed to obtain approximation formulas based on the local volatility At The Money. Here, we derive alternative expansions involving the local volatility at strike. ...
متن کاملAsymptotics and calibration of local volatility models
We derive a direct link between local and implied volatilities in the form of a quasilinear degenerate parabolic partial differential equation. Using this equation we establish closed-form asymptotic formulae for the implied volatility near expiry as well as for deep inand out-of-the-money options. This in turn leads us to propose a new formulation near expiry of the calibration problem for the...
متن کاملFrom Local Volatility to Local L¶evy Models
We de ̄ne the class of local L¶evy processes. These are L¶evy processes time changed by an inhomogeneous local speed function. The local speed function is a deterministic function of time and the level of the process itself. We show how to reverse engineer the local speed function from traded option prices of all strikes and maturities. The local L¶evy processes generalize the class of local vol...
متن کاملDynamic Factor Models with Stochastic Volatility
I introduce posterior simulation methods for a dynamic latent factor model featuring both mean and variance factors. The cross-sectional dimension may be large, so the methods are applicable to data-rich environments. I apply the new methods in two empirical applications. The first involves a panel of 10 currencies, with daily log returns observed over a decade; the second, a panel of 134 real ...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Finance and Stochastics
سال: 2008
ISSN: 0949-2984,1432-1122
DOI: 10.1007/s00780-008-0078-4