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Good volatility, bad volatility and option pricing

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Authors and Corporations: Feunou, Bruno (Author), Okou, Cédric (Author)
Other Authors: Okou, Cédric [Author]
Type of Resource: E-Book
Language: English
published:
[Ottawa] Bank of Canada December 2017
Series: Bank of Canada: Staff working paper ; 2017, 52
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Notes: Zusammenfassung in französischer Sprache
Description
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