Further processing options
Good volatility, bad volatility and option pricing
Saved in:
| Authors and Corporations: | , |
|---|---|
| Other Authors: | Okou, Cédric [Author] |
| Type of Resource: | E-Book |
| Language: | English |
| published: | |
| Series: |
Bank of Canada: Staff working paper ; 2017, 52
|
| Subjects: | |
| Source: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| Notes: | Zusammenfassung in französischer Sprache |
| Summary: | Advances in variance analysis permit the splitting of the total quadratic variation of a jump diffusion process into upside and downside components. Recent studies establish that this decomposition enhances volatility predictions, and highlight the upside/downside variance spread as a driver of the asymmetry in stock price distributions. To appraise the economic gain of this decomposition, we design a new and flexible option pricing model in which the underlying asset price exhibits distinct upside and downside semi-variance dynamics driven by their model-free proxies. The new model outperforms common benchmarks, especially the alternative that splits the quadratic variation into diffusive and jump components. |
|---|---|
| Physical Description: | 1 Online-Ressource (circa 48 Seiten); Illustrationen |
| Notes: | Zusammenfassung in französischer Sprache |