A Risk Neutral Stochastic Implied Volatility Model and Applications: The Dynamics of At-the-Money Implied Volatility with its Applications - Couverture souple

He (¿), Peng(¿)

 
9783639176261: A Risk Neutral Stochastic Implied Volatility Model and Applications: The Dynamics of At-the-Money Implied Volatility with its Applications
Couverture souple
ISBN 10 : 363917626X ISBN 13 : 9783639176261
Editeur : VDM Verlag, 2009

Synopsis

The dynamics of smile surface lead practitioner and researcher to introduce the randomness in the implied volatility, which is are specific in option markets. The monograph develops a risk-neutral stochastic At- the-Money implied volatility model and its applications. Three characteristics of implied volatility are presented. After the proper model setup, the risk-neutral drift term of stochastic implied volatility is derived, which is necessary to be no-arbitrage. We proved that the implied volatility of At-the-Money options mature immediately should converge to underlying volatility at the rate of time to maturity, which specifies the stochastic process of underlying volatility. Monte Carlo simulation is used to simulate the complex whole system. Skew curve and terminal underlying price distribution are studied. The two model parameters are able to explain market skew phenomena quite well. Barrier option is priced and future implied volatility is forecast off the simulation. The monograph should be helpful for option traders, and should be especially useful for graduate students and researcher in financial math field.

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Éditeur
VDM Verlag
Date d'édition
2009
Langue
anglais
ISBN 10 
363917626X
ISBN 13 
9783639176261
Reliure
Broché
Nombre de pages
68
Coordonnées du fabricant
non disponible
Personne responsable
non disponible