MULTIVARIATE OPTION PRICING MODELS WITH LÉVY AND SATO VG MARGINAL PROCESSES

2018 ◽  
Vol 21 (02) ◽  
pp. 1850007 ◽  
Author(s):  
FLORENCE GUILLAUME
Keyword(s):  
Option Pricing ◽  
Asset Returns ◽  
Dependence Structure ◽  
Financial Instruments ◽  
Multivariate Models ◽  
Pricing Models ◽  
Stylized Facts ◽  
Basket Options ◽  
Spread Options

Pricing and hedging of financial instruments whose payoff depends on the joint realization of several underlyings (basket options, spread options, etc.) require multivariate models that are, at the same time, computationally tractable and flexible enough to accommodate the stylized facts of asset returns and of their dependence structure. Among the most popular models one finds models with VG marginals. The aim of this paper is to compare four multivariate models that are characterized by VG laws at unit time and to assess their performance by considering the flexibility they offer to calibrate the dependence structure for fixed marginals.

scholarly journals Pricing Spread Options with Stochastic Interest Rates

2014 ◽  
Vol 2014 ◽  
pp. 1-11 ◽  
Author(s):  
Yunguo Jin ◽  
Shouming Zhong
Keyword(s):  
Option Pricing ◽  
Interest Rates ◽  
Stock Returns ◽  
Grid Method ◽  
Pricing Models ◽  
Stochastic Interest Rates ◽  
Spread Options ◽  
Asset Pricing Models ◽  
Stochastic Interest ◽  
Spread Option

Although spread options have been extensively studied in the literature, few papers deal with the problem of pricing spread options with stochastic interest rates. This study presents three novel spread option pricing models that permit the interest rates to be random. The paper not only presents a good approach to formulate spread option pricing models with stochastic interest rates but also offers a new test bed to understand the dynamics of option pricing with interest rates in a variety of asset pricing models. We discuss the merits of the models and techniques presented by us in some asset pricing models. Finally, we use regular grid method to the calculation of the formula when underlying stock returns are continuous and a mixture of both the regular grid method and a Monte Carlo method to the one when underlying stock returns are discontinuous, and sensitivity analyses are presented.

INFORMATION FLOW DEPENDENCE IN FINANCIAL MARKETS

2020 ◽  
Vol 23 (05) ◽  
pp. 2050029
Author(s):  
MARKUS MICHAELSEN
Keyword(s):  
Financial Markets ◽  
Information Flow ◽  
Asset Returns ◽  
Dependence Structure ◽  
Multivariate Models ◽  
Continuous Time Model ◽  
Time Model ◽  
Simulated Likelihood ◽  
Flow Dependence ◽  
Levy Copula

In response to empirical evidence, we propose a continuous-time model for multivariate asset returns with a two-layered dependence structure. The price process is subject to multivariate information arrivals driving the market activity modeled by nondecreasing pure-jump Lévy processes. A Lévy copula determines the jump dependence and allows for a generic multivariate information flow with a flexible structure. Conditional on the information flow, asset returns are jointly normal. Within this setup, we provide an estimation framework based on maximum simulated likelihood. We apply novel multivariate models to equity data and obtain estimates which meet an economic intuition with respect to the two-layered dependence structure.

Joint Calibration of Option Pricing Models via Particle Methods

2005 ◽  
Author(s):  
Billy Amzal ◽  
Yonathan Ebguy ◽  
Sebastien Roland
Keyword(s):  
Option Pricing ◽  
Particle Methods ◽  
Pricing Models

scholarly journals Quanto Pricing beyond Black–Scholes

2021 ◽  
Vol 14 (3) ◽  
pp. 136
Author(s):  
Holger Fink ◽  
Stefan Mittnik
Keyword(s):  
Option Pricing ◽  
Goodness Of Fit ◽  
Calibration Procedure ◽  
Barrier Options ◽  
Pricing Models ◽  
Modeling Framework ◽  
Double Barrier ◽  
Parameter Stability ◽  
Comprehensive Data ◽  
Black Scholes

Since their introduction, quanto options have steadily gained popularity. Matching Black–Scholes-type pricing models and, more recently, a fat-tailed, normal tempered stable variant have been established. The objective here is to empirically assess the adequacy of quanto-option pricing models. The validation of quanto-pricing models has been a challenge so far, due to the lack of comprehensive data records of exchange-traded quanto transactions. To overcome this, we make use of exchange-traded structured products. After deriving prices for composite options in the existing modeling framework, we propose a new calibration procedure, carry out extensive analyses of parameter stability and assess the goodness of fit for plain vanilla and exotic double-barrier options.

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