Journal ArticleDOI
A spectral estimation of tempered stable stochastic volatility models and option pricing
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TLDR
A characteristic function-based method is proposed to estimate the time-changed Levy models, which take into account both stochastic volatility and infinite-activity jumps, and results and option pricing performance indicate that the infinite- activity model performs better than the finite-activity one.About:
This article is published in Computational Statistics & Data Analysis.The article was published on 2012-11-01. It has received 13 citations till now. The article focuses on the topics: Volatility smile & Stochastic volatility.read more
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Lévy processes and infinitely divisible distributions
TL;DR: In this paper, the authors consider the distributional properties of Levy processes and propose a potential theory for Levy processes, which is based on the Wiener-Hopf factorization.
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An Empirical Investigation of Continuous-Time Equity Return Models
TL;DR: In this article, the authors extend the class of stochastic volatility diffusions for asset returns to encompass Poisson jumps of time-varying intensity, and find that any reasonably descriptive continuous-time model for equity-index returns must allow for discrete jumps with a pronounced negative relationship between return and volatility innovations.
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Option pricing under stochastic volatility and tempered stable Lévy jumps
TL;DR: In this paper, the authors introduce a stochastic volatility model for option pricing that exhibits Levy jump behavior and empirically compare the estimated log-return probability density and the option prices produced from this model to both the Bates model and the Black-Scholes model.
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Sequential Bayesian Analysis of Time-Changed Infinite Activity Derivatives Pricing Models
TL;DR: In this paper, a sequential Monte Carlo method with the proposal density generated by the unscented Kalman filter was proposed to solve the particle impoverishment problem inherent to the conventional particle filter.
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Statistical properties and economic implications of jump-diffusion processes with shot-noise effects
TL;DR: This paper analyzes the Shot-Noise Jump-Diffusion model of Altmann, Schmidt and Stute (2008), which introduces a new situation where the effects of the arrival of rare, shocking information to the financial markets may fade away in the long run.
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.
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A Theory of the Term Structure of Interest Rates.
TL;DR: In this paper, the authors use an intertemporal general equilibrium asset pricing model to study the term structure of interest rates and find that anticipations, risk aversion, investment alternatives, and preferences about the timing of consumption all play a role in determining bond prices.
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Option pricing when underlying stock returns are discontinuous
TL;DR: In this article, an option pricing formula was derived for the more general case when the underlying stock returns are generated by a mixture of both continuous and jump processes, and the derived formula has most of the attractive features of the original Black-Scholes formula.
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A Theory for the Term Structure of Interest Rates
Thomas Alderweireld,Jean Nuyts +1 more
TL;DR: The discretised theoretical distributions matching the empirical data from the Federal Reserve System are deduced from aDiscretised seed which enjoys remarkable scaling laws and may be used to develop new methods for the computation of the value-at-risk and fixed-income derivative pricing.