Robust Calibration of Financial Models Using Bayesian Estimators
نویسندگان
چکیده
We consider a general calibration problem for derivative pricing models, which we reformulate into a Bayesian framework to attain posterior distributions for model parameters. It is then shown how the posterior distribution can be used to estimate prices for exotic options. We apply the procedure to a discrete local volatility model and work in great detail through numerical examples to clarify the construction of Bayesian estimators and their robustness to the model specification, number of calibration products, noisy data and misspecification of the prior.
منابع مشابه
New Approaches in 3D Geomechanical Earth Modeling
In this paper two new approaches for building 3D Geomechanical Earth Model (GEM) were introduced. The first method is a hybrid of geostatistical estimators, Bayesian inference, Markov chain and Monte Carlo, which is called Model Based Geostatistics (MBG). It has utilized to achieve more accurate geomechanical model and condition the model and parameters of variogram. The second approach is the ...
متن کاملOptimal mean-square-error calibration of classifier error estimators under Bayesian models
A recently proposed Bayesian modeling framework for classification facilitates both the analysis and optimization of error estimation performance. The Bayesian error estimator is then defined to have optimal mean-square error performance, but in many situations closed-form representations are unavailable and approximations may not be feasible. To address this, we present a method to optimally c...
متن کاملNon-linear Bayesian prediction of generalized order statistics for liftime models
In this paper, we obtain Bayesian prediction intervals as well as Bayes predictive estimators under square error loss for generalized order statistics when the distribution of the underlying population belongs to a family which includes several important distributions.
متن کاملCalibration Weighting to Compensate for Extreme Values, Non-response and Non-coverage in Labor Force Survey
Frame imperfection, non-response and unequal selection probabilities always affect survey results. In order to compensate for the effects of these problems, Devill and Särndal (1992) introduced a family of estimators called calibration estimators. In these estimators we look for weights that have minimum distance with design weights based on a distance function and satisfy calibration equa...
متن کاملBayesian paradigm for analysing count data in longitudina studies using Poisson-generalized log-gamma model
In analyzing longitudinal data with counted responses, normal distribution is usually used for distribution of the random efffects. However, in some applications random effects may not be normally distributed. Misspecification of this distribution may cause reduction of efficiency of estimators. In this paper, a generalized log-gamma distribution is used for the random effects which includes th...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2012