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Showing 1 to 12 of 12 for “"Volatility Skew"”.
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Two approaches to modelling the volatility skew
… study examines two approaches to modelling the volatility skew that is used to price options on the Johannesburg Stock Exchange (JSE) TOP40 index. The first approach involves using historical prices of the underlying index to obtain a model of the skew. Two models that use this approach, namely …
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Pricing equity options on multiple underlyings in the South African context
… distributions exhibit fatter tails and positive skewness that is not explained by a normal distribution. Moreover, the standard Black-Scholes option pricing framework that assumes that asset prices follow geometric Brownian Motion does not explain option prices observed in the market. In …
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Modelling illiquid volatility skews
… strike levels, forming the associated implied volatility skew of the respective market under consideration. This, however, is not always feasible when it comes to the individual stocks within the market, as single stock options trade a lot less frequently. This dissertation makes use of data …
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The Lifted Heston Stochastic Volatility Model
Can we capture the explosive nature of volatility skew observed in the market, without resorting to non-Markovian models? We show that, in terms of skew, the Heston model cannot match the market at both long and short maturities simultaneously. We introduce Abi Jaber (2019)'s Lifted Heston model …
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Pricing with Bivariate Unspanned Stochastic Volatility Models
Unspanned stochastic volatility (USV) models have gained popularity in the literature. USV models contain at least one source of volatility-related risk that cannot be hedged with bonds, referred to as the unspanned volatility factor(s). Bivariate USV models are the simplest case, comprising of one …
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Empirical essays on option-implied information and asset pricing
… the predictive ability of option-implied volatility measures proposed by previous studies by using firm-level option and stock data. This essay documents significant non-zero returns on long-short portfolios formed on call-put implied volatility spread, and implied volatility skew. …
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A Comparison Between Break-Even Volatility and Deep Hedging For Option Pricing
… paid in particular to the assumption of constant volatility, which does not hold in practice (Yalincak, 2012). The standard in industry is to use various volatility estimation and parameterisation techniques when pricing to more closely recover the market-implied volatility skew. One such …
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An Application of Deep Hedging in Pricing and Hedging Caplets on the Prime Lending Rate
… hedging approach can also be used to recover a volatility skew which is in fact, needed as an input in the model dependent approach. The approach has certain downsides to it: a rich set of historical data is required and it is more time consuming to conduct than the model dependent approach. The …
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Rough volatility models
So-called rough stochastic volatility models constitute the latest advancement in option price modeling. In contrast to popular bivariate diffusion models such as Heston, here the driving noise of volatility is modeled by a fractional Brownian motion (fBM) with scaling in the rough regime of Hurst …
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Option Pricing models with Stochastic Volatility and Jumps
… capture real world behavior (such as stochastic volatility effects and jumps in the price of the underlying). This dissertation tackles the question of which option pricing model to use; it compares diffusion, pure jump and jump-diffusion models. All models are fitted to one-day price data on …
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Essays on the Modelling of S&P 500 Volatility
… the patterns of term-structure of implied volatility and examines the performance of different specifications of time-series and options-based volatility forecasting models under the influence of the observed market biases. Our research is based primarily upon the use of S&P 500 data for …
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Analytical Solutions of the SABR Stochastic Volatility Model
… to the practice of option trading, in which the volatility parameter of the Black-Scholes-Merton's model has become the market "language'' of quoting option prices. Despite its tremendous success, the Black-Scholes-Merton model has exhibited a few well-known deficiencies, the most important of …