Journal ArticleDOI
A general framework for discretely sampled realized variance derivatives in stochastic volatility models with jumps
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TLDR
A novel and efficient transform-based method to price swaps and options related to discretely-sampled realized variance under a general class of stochastic volatility models with jumps, utilizing frame duality and density projection method combined with a novel continuous-time Markov chain (CTMC) weak approximation scheme of the underlying variance process.About:
This article is published in European Journal of Operational Research.The article was published on 2017-10-01. It has received 95 citations till now. The article focuses on the topics: Stochastic volatility & Volatility smile.read more
Citations
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Journal ArticleDOI
Valuing equity-linked death benefits in general exponential Lévy models
TL;DR: A projection method combined with Fast Fourier Transform (FFT) is applied to value equity-linked death benefit products and various numerical valuation results computed by B-spline functions are presented to demonstrate the method’s efficiency and accuracy.
Journal ArticleDOI
A general framework for time-changed Markov processes and applications
TL;DR: A two-layer approximation scheme is developed by further approximating the driving process in constructing the time change using an independent CTMC and derives the functional equation characterizing the double transforms of the transition matrix of the resulting time-changed CTMC.
Journal ArticleDOI
Forecasting the U.S. stock volatility: An aligned jump index from G7 stock markets
TL;DR: In this paper, the authors proposed new jump indexes that are aligned with the jump information on the G7 stock markets to predict the U.S. stock market volatility, and the results are consistent across the direction-of-change test and a variety of robustness tests, showing that this new jump index can contain much more predictive information than jump itself or jump index based on the Principal Component Analysis (PCA).
Journal ArticleDOI
Efficient Asian option pricing under regime switching jump diffusions and stochastic volatility models
J. Lars Kirkby,Duy Nguyen +1 more
TL;DR: In this paper, the authors developed a novel and efficient transform method to price Asian options for very general asset dynamics, including regime switching Levy processes and other jump diffusions as well as stochastic volatility models with jumps.
Journal ArticleDOI
Analysis of Markov Chain Approximation for Option Pricing and Hedging: Grid Design and Convergence Behavior
Gongqiu Zhang,Lingfei Li +1 more
TL;DR: A general method for option pricing and hedging in Markovian models with continuous-state spaces and a key issue for its efficiency is how to design the grid for the Markov chain approximation.
References
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Journal ArticleDOI
A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
TL;DR: In this paper, a closed-form solution for the price of a European call option on an asset with stochastic volatility is derived based on characteristi c functions and can be applied to other problems.
Book
Probability and Measure
TL;DR: In this paper, the convergence of distributions is considered in the context of conditional probability, i.e., random variables and expected values, and the probability of a given distribution converging to a certain value.
Journal ArticleDOI
The Pricing of Options on Assets with Stochastic Volatilities
John Hull,Alan White +1 more
TL;DR: In this article, the option price is determined in series form for the case in which the stochastic volatility is independent of the stock price, and the solution of this differential equation is independent if (a) the volatility is a traded asset or (b) volatility is uncorrelated with aggregate consumption, if either of these conditions holds, the risk-neutral valuation arguments of Cox and Ross [4] can be used in a straightfoward way.
Journal ArticleDOI
Option valuation using the fast Fourier transform
Peter Carr,Dilip B. Madan +1 more
TL;DR: In this paper, the fast Fourier transform is used to value options when the characteristic function of the return is known analytically, and it is shown how to use it for value selection.
Journal ArticleDOI
Transform analysis and asset pricing for affine jump-diffusions
TL;DR: In this article, the authors provide an analytical treatment of a class of transforms, including various Laplace and Fourier transforms as special cases, that allow an analytical Treatment of a range of valuation and econometric problems.
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