Related papers: Local Volatility Pricing Models for Long-dated FX …
This work is devoted to the study of modeling geophysical and financial time series. A class of volatility models with time-varying parameters is presented to forecast the volatility of time series in a stationary environment. The modeling…
We study the local sensitivity of heating degree day (HDD) and cooling degree day (CDD) temperature futures and option prices with respect to perturbations in the deseasonalized temperature or in one of its derivatives up to a certain order…
In this memorie de fin d'etudes, we review some techniques to estimate historical volatility and to price Variance Swaps
In this paper we extend discrete time semi-static trading strategies by also allowing for dynamic trading in a finite amount of options, and we study the consequences for the model-independent super-replication prices of exotic derivatives.…
We empirically analyze the scaling properties of daily Foreign Exchange rates, Stock Market indices and Bond futures across different financial markets. We study the scaling behaviour of the time series by using a generalized Hurst exponent…
This paper is concerned with the estimation of the volatility process in a stochastic volatility model of the following form: $dX_t=a_tdt+\sigma_tdW_t$, where $X$ denotes the log-price and $\sigma$ is a c\`adl\`ag semi-martingale. In the…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior…
We derive an explicit asymptotic approximation for the implied volatilities of Call options written on bonds assuming the short-rate is described by an affine short-rate model. For specific affine short-rate models, we perform numerical…
A new stochastic theory of a foreign exchange markets dynamics is developed. As a result we have the new probability distribution which well describes statistical and scaling dependencies ''experimentally'' observed in foreign exchange…
We develop a multi-factor stochastic volatility Libor model with displacement, where each individual forward Libor is driven by its own square-root stochastic volatility process. The main advantage of this approach is that, maturity-wise,…
We discuss price variations distributions in foreign exchange markets, characterizing them both in calendar and business time frameworks. The price dynamics is found to be the result of two distinct processes, a multi-variance diffusion and…
We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar L\'evy-type stochastic processes. We derive rigorous error bounds for the…
We consider call option prices in diffusion models close to expiry, in an asymptotic regime ("moderately out of the money") that interpolates between the well-studied cases of at-the-money options and out-of-the-money fixed-strike options.…
It is well known that in models with time-homogeneous local volatility functions and constant interest and dividend rates, the European Put prices are transformed into European Call prices by the simultaneous exchanges of the interest and…
The availability of data on economic uncertainty sparked a lot of interest in models that can timely quantify episodes of international spillovers of uncertainty. This challenging task involves trading off estimation accuracy for more…
A common approach to valuing exotic options involves choosing a model and then determining its parameters to fit the volatility surface as closely as possible. We refer to this as the model calibration approach (MCA). A disadvantage of MCA…
We introduce the Local Occupied Volatility (LOV) model that sits between Dupire's local volatility and fully path-dependent dynamics. By design, the LOV model ensures automatic calibration to European vanilla options, while offering the…
Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…
A time-varying cointegration model for foreign exchange rates is presented. Unlike previous studies, we allow the loading matrix in the vector error correction (VEC) model to be varying over time. Because the loading matrix in the VEC model…
We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is…