The Performance Of Popular Stochastic Volatility Option Pricing Models During The Subprime Crisis
Download The Performance Of Popular Stochastic Volatility Option Pricing Models During The Subprime Crisis PDF/ePub or read online books in Mobi eBooks. Click Download or Read Online button to get The Performance Of Popular Stochastic Volatility Option Pricing Models During The Subprime Crisis book now. This website allows unlimited access to, at the time of writing, more than 1.5 million titles, including hundreds of thousands of titles in various foreign languages.
The Performance of Popular Stochastic Volatility Option Pricing Models During the Subprime Crisis
Using daily options prices on the Eurostoxx 50 stock index over the whole year 2008, we compare the performance of three popular stochastic volatility models (Heston, 1993; Bates, 1996; Heston and Nandi, 2'007, in addition to the traditional Black-Scholes model and a proprietary trading desk model. We show that the most consistent in-sample and out-of-sample statistical performance is obtained for the internal model. However, the Bates model seems to be better suited to short term (out-of-the-money) options while the Heston model seems to perform better for medium or long term options. In terms of hedging performance, the Heston and Nandi model exhibits the best average, albeit most volatile, result and the Heston model outperforms the Black and Scholes model in terms of hedging errors, mainly for option contracts that mature in-the-money.
Derivatives in Financial Markets with Stochastic Volatility
Author: Jean-Pierre Fouque
language: en
Publisher: Cambridge University Press
Release Date: 2000-07-03
This book, first published in 2000, addresses pricing and hedging derivative securities in uncertain and changing market volatility.
Advances in Financial Risk Management
The latest research on measuring, managing and pricing financial risk. Three broad perspectives are considered: financial risk in non-financial corporations; in financial intermediaries such as banks; and finally within the context of a portfolio of securities of different credit quality and marketability.