Is the Minimum Value of an Option on Variance Generated by Local Volatility?
نویسندگان
چکیده
We discuss the possibility of obtaining model-free bounds on volatility derivatives, given present market data in the form of a calibrated local volatility model. A counter-example to a wide-spread conjecture is given. keywords: local vol, Dupire’s formula; MSC: 91G99; JEL: G10.
منابع مشابه
Modeling Gold Volatility: Realized GARCH Approach
F orecasting the volatility of a financial asset has wide implications in finance. Conditional variance extracted from the GARCH framework could be a suitable proxy of financial asset volatility. Option pricing, portfolio optimization, and risk management are examples of implications of conditional variance forecasting. One of the most recent methods of volatility forecasting is Real...
متن کاملRisk measurement and Implied volatility under Minimal Entropy Martingale Measure for Levy process
This paper focuses on two main issues that are based on two important concepts: exponential Levy process and minimal entropy martingale measure. First, we intend to obtain risk measurement such as value-at-risk (VaR) and conditional value-at-risk (CvaR) using Monte-Carlo methodunder minimal entropy martingale measure (MEMM) for exponential Levy process. This Martingale measure is used for the...
متن کاملOption Pricing under Hybrid Stochastic and Local Volatility
This paper deals with an option pricing model which can be thought of as a hybrid stochastic and local volatility model. This model is built on the local volatility term of the well-known constant elasticity of variance (CEV) model multiplied by a stochastic volatility term driven by a fast mean-reverting Ornstein-Uhlenbeck process. An asymptotic formula for European option price is derived to ...
متن کاملModeling Stock Return Volatility Using Symmetric and Asymmetric Nonlinear State Space Models: Case of Tehran Stock Market
Volatility is a measure of uncertainty that plays a central role in financial theory, risk management, and pricing authority. Turbulence is the conditional variance of changes in asset prices that is not directly observable and is considered a hidden variable that is indirectly calculated using some approximations. To do this, two general approaches are presented in the literature of financial ...
متن کاملSato Processes and the Valuation of Structured Products ∗
We report on the adequacy of using Sato processes to value equity structured products. In models used to price options on realized variance, the latter must be a random variable with a positive variance. An analysis of this variance of realized variance for Sato processes shows that these processes may be suited to option contracts on realized volatility. Nonlinear pricing principles based on h...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید
ثبت ناماگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید
ورودعنوان ژورنال:
- SIAM J. Financial Math.
دوره 2 شماره
صفحات -
تاریخ انتشار 2011