Modelling and Simulation of Stochastic Volatility in Finance

Modelling and Simulation of Stochastic Volatility in Finance
Author :
Publisher : Universal-Publishers
Total Pages : 219
Release :
ISBN-10 : 9781581123838
ISBN-13 : 1581123833
Rating : 4/5 (833 Downloads)

Book Synopsis Modelling and Simulation of Stochastic Volatility in Finance by : Christian Kahl

Download or read book Modelling and Simulation of Stochastic Volatility in Finance written by Christian Kahl and published by Universal-Publishers. This book was released on 2008 with total page 219 pages. Available in PDF, EPUB and Kindle. Book excerpt: The famous Black-Scholes model was the starting point of a new financial industry and has been a very important pillar of all options trading since. One of its core assumptions is that the volatility of the underlying asset is constant. It was realised early that one has to specify a dynamic on the volatility itself to get closer to market behaviour. There are mainly two aspects making this fact apparent. Considering historical evolution of volatility by analysing time series data one observes erratic behaviour over time. Secondly, backing out implied volatility from daily traded plain vanilla options, the volatility changes with strike. The most common realisations of this phenomenon are the implied volatility smile or skew. The natural question arises how to extend the Black-Scholes model appropriately. Within this book the concept of stochastic volatility is analysed and discussed with special regard to the numerical problems occurring either in calibrating the model to the market implied volatility surface or in the numerical simulation of the two-dimensional system of stochastic differential equations required to price non-vanilla financial derivatives. We introduce a new stochastic volatility model, the so-called Hyp-Hyp model, and use Watanabe's calculus to find an analytical approximation to the model implied volatility. Further, the class of affine diffusion models, such as Heston, is analysed in view of using the characteristic function and Fourier inversion techniques to value European derivatives.


Modelling and Simulation of Stochastic Volatility in Finance Related Books

Modelling and Simulation of Stochastic Volatility in Finance
Language: en
Pages: 219
Authors: Christian Kahl
Categories: Business & Economics
Type: BOOK - Published: 2008 - Publisher: Universal-Publishers

DOWNLOAD EBOOK

The famous Black-Scholes model was the starting point of a new financial industry and has been a very important pillar of all options trading since. One of its
Mathematical Modeling And Computation In Finance: With Exercises And Python And Matlab Computer Codes
Language: en
Pages: 1310
Authors: Cornelis W Oosterlee
Categories: Business & Economics
Type: BOOK - Published: 2019-10-29 - Publisher: World Scientific

DOWNLOAD EBOOK

This book discusses the interplay of stochastics (applied probability theory) and numerical analysis in the field of quantitative finance. The stochastic models
Stochastic Simulation and Applications in Finance with MATLAB Programs
Language: en
Pages: 354
Authors: Huu Tue Huynh
Categories: Business & Economics
Type: BOOK - Published: 2011-11-21 - Publisher: John Wiley & Sons

DOWNLOAD EBOOK

Stochastic Simulation and Applications in Finance with MATLAB Programs explains the fundamentals of Monte Carlo simulation techniques, their use in the numerica
Stochastic Volatility Modeling
Language: en
Pages: 520
Authors: Lorenzo Bergomi
Categories: Business & Economics
Type: BOOK - Published: 2015-12-16 - Publisher: CRC Press

DOWNLOAD EBOOK

Packed with insights, Lorenzo Bergomi's Stochastic Volatility Modeling explains how stochastic volatility is used to address issues arising in the modeling of d
Applied Quantitative Finance
Language: en
Pages: 369
Authors: Wolfgang Karl Härdle
Categories: Business & Economics
Type: BOOK - Published: 2017-08-02 - Publisher: Springer

DOWNLOAD EBOOK

This volume provides practical solutions and introduces recent theoretical developments in risk management, pricing of credit derivatives, quantification of vol