Access the full text.
Sign up today, get DeepDyve free for 14 days.
Loading next page...
/lp/springer_journal/r-2gam-stochastic-volatility-model-flexibility-and-calibration-1o2tHWLtbe
References (42)
-
Mark Schroder (1989)
Computing the Constant Elasticity of Variance Option Pricing FormulaJournal of Finance, 44
-
S. Heston (1993)
A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency OptionsReview of Financial Studies, 6
-
E Derman, I Kani (1994)
Riding on a smileRisk, 7
-
S. Heston, Saikat Nandi (2000)
A Closed-Form GARCH Option Valuation ModelDerivatives
-
JS Ang, KD Jou, TY Lai (2013)
Encyclopedia of finance -
B. Dumas, Jeff Fleming, R. Whaley (1996)
Implied volatility functions: empirical testsIEEE/IAFE 1996 Conference on Computational Intelligence for Financial Engineering (CIFEr)
-
S. Shreve (2010)
Stochastic Calculus for Finance II: Continuous-Time Models -
Peter Christoffersen, Steve Heston, Kris Jacobs, Cirano, Peter Carr, F. Diebold, Rob Engle, Nour Meddahi, Haluk
Série Scientifique Scientific Series Option Valuation with Conditional Skewness Option Valuation with Conditional Skewness -
R. Engle (1982)
Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflationEconometrica, 50
-
S. Mozumder, G. Sorwar, K. Dowd (2013)
Option pricing under non-normality: a comparative analysisReview of Quantitative Finance and Accounting, 40
-
R. Rebonato (2004)
Volatility and correlation : the perfect hedger and the fox -
S Shreve (2004)
Stochastic calculus for finance II: continuous-time models. 1st edn -
JB Wiggins (1987)
Option values under stochastic volatilitiesJ Financ Econ, 19
-
Peter Christoffersen, S. Heston, Kris Jacobs (2009)
The Shape and Term Structure of the Index Option Smirk: Why Multifactor Stochastic Volatility Models Work so WellEconometrics: Applied Econometrics & Modeling eJournal
-
S. Beckers (1980)
The Constant Elasticity of Variance Model and Its Implications For Option PricingJournal of Finance, 35
-
(2013)
by short term asymptotics. Research paper HEC, Genève and FAME -
Jow-Ran Chang, Mao-Wei Hung, Cheng-Few Lee, Hsin-Min Lu (2007)
The Jump Behavior of Foreign Exchange Market: Analysis of Thai BahtReview of Pacific Basin Financial Markets and Policies, 10
-
P. Ritchken, R. Trevor (1999)
Pricing Options under Generalized GARCH and Stochastic Volatility ProcessesJournal of Finance, 54
-
A. Medvedev, O. Scaillet (2003)
A Simple Calibration Procedure of Stochastic Volatility Models with Jumps by Short Term AsymptoticsDerivatives eJournal
-
Steven Manaster, G. Koehler (1982)
The Calculation of Implied Variances from the Black‐Scholes Model: A NoteJournal of Finance, 37
-
J Gatheral (2006)
The volatility surface: a practitioner’s guide -
R Rebonato (2004)
Volatility and correlation: the perfect hedger and the fox. 2nd edn -
John Binder, M. Merges (2000)
Stock Market Volatility and Economic FactorsReview of Quantitative Finance and Accounting, 17
-
P Christoffersen, S Heston, K Jacobs (2006)
Option valuation with conditional skewnessJ Econom, 131
-
Bjørn Eraker (2004)
Do Stock Prices and Volatility Jump? Reconciling Evidence from Spot and Option PricesJournal of Finance, 59
-
(2010)
Interest rate modeling, volume I: foundation and vanilla models -
(1973)
The valuation of options and corporate liabilities -
K. Skindilias, C. Lo (2012)
Local volatility calibration during turbulent periodsReview of Quantitative Finance and Accounting, 44
-
T. Harikumar, Maria Boyrie, Simon Pak (2004)
Evaluation of Black-Scholes and GARCH Models Using Currency Call Options DataReview of Quantitative Finance and Accounting, 23
-
James Ang, Gwoduan Jou, Tsong-Yue Lai (2013)
A Comparison of Formulas to Compute Implied Standard Deviation -
Bruno Dupire (1994)
Pricing with a Smile -
P Glasserman (2003)
Monte Carlo methods in financial engineering -
G. Bakshi, C. Cao, Zhiwu Chen (1997)
Empirical Performance of Alternative Option Pricing ModelsJournal of Finance, 52
-
(1975)
Notes on option pricing I: constant elasticity of diffusions -
R-R Chen, C-F Lee, H-H Lee (2009)
Empirical performance of the constant elasticity variance option pricing modelRev Pac Basin Financ Mark Pol, 12
-
Larry Eisenberg, R. Jarrow (1994)
Option pricing with random volatilities in complete marketsReview of Quantitative Finance and Accounting, 4
-
C. Jones (2003)
The dynamics of stochastic volatility: evidence from underlying and options marketsJournal of Econometrics, 116
-
K. Chan, G. Andrew, Karolyi, F. Longstaff, A. Sanders, G. Karolyi, W. Bailey, Emilio Barone, F. Black, T. Bollerslev, Stephen Buser, John Campbell, Jennifer Conrad, G. Constantinides, K. Dunn, Margaret Forster, Campbell Harvey, P. Hendershott, D. Mayers, Huston Mcculloch, Daniel Nel-Son, D. Shimko, Renl Stulz, S. Turnbull, C. Wells, Finance Workshop (1992)
An Empirical Comparison of Alternative Models of the Short-Term Interest RateJournal of Finance, 47
-
J. Hull, Alan White (1987)
The Pricing of Options on Assets with Stochastic VolatilitiesJournal of Finance, 42
-
Shafiqur Rahman, Cheng-Few Lee, K. Ang (2002)
Intraday Return Volatility Process: Evidence from NASDAQ StocksReview of Quantitative Finance and Accounting, 19
-
Louis Scott (1987)
Option Pricing when the Variance Changes Randomly: Theory, Estimation, and an ApplicationJournal of Financial and Quantitative Analysis, 22
-
(1997)
AC (eds) Encyclopedia of finance, Springer, Berlin, pp
- Publisher
- Springer Journals
- Copyright
- Copyright © 2014 by Springer Science+Business Media New York
- Subject
- Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
- ISSN
- 0924-865X
- eISSN
- 1573-7179
- DOI
- 10.1007/s11156-014-0443-7
- Publisher site
- See Article on Publisher Site
Abstract
This paper investigates the potential of the 2GAM stochastic volatility model for capturing varying properties of option prices represented by the implied volatility surface. The 2GAM model is shown to be a generalization of the Heston model. Then, taking the original Heston model as the benchmark, the paper explores the flexibility allowed by the 2GAM model. More precisely, the focus is on the restricted 2GAM (R-2GAM) model which builds upon the Heston model reproducing a given short-term implied volatility skew. Going from theory to practice, the paper suggests a numerically-feasible calibration procedure for the R-2GAM model. In an application to the valuation of the S&P 500 option contracts this paper addresses the challenges of calibrating the R-2GAM model to market prices and raises concerns of possible over-parameterization.
Journal
Review of Quantitative Finance and Accounting – Springer Journals
Published: Apr 5, 2014