Estimation and prediction under local volatility jump-diffusion model
- Authors
- Kim, Namhyoung; Lee, Younhee
- Issue Date
- 1-Feb-2018
- Publisher
- ELSEVIER SCIENCE BV
- Keywords
- Option pricing; Local volatility model; Jump-diffusion model; KOSPI 200 index option
- Citation
- PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS, v.491, pp.729 - 740
- Journal Title
- PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
- Volume
- 491
- Start Page
- 729
- End Page
- 740
- URI
- https://scholarworks.bwise.kr/gachon/handle/2020.sw.gachon/4058
- DOI
- 10.1016/j.physa.2017.09.035
- ISSN
- 0378-4371
- Abstract
- Volatility is an important factor in operating a company and managing risk. In the portfolio optimization and risk hedging using the option, the value of the option is evaluated using the volatility model. Various attempts have been made to predict option value. Recent studies have shown that stochastic volatility models and jump-diffusion models reflect stock price movements accurately. However, these models have practical limitations. Combining them with the local volatility model, which is widely used among practitioners, may lead to better performance. In this study, we propose a more effective and efficient method of estimating option prices by combining the local volatility model with the jump-diffusion model and apply it using both artificial and actual market data to evaluate its performance. The calibration process for estimating the jump parameters and local volatility surfaces is divided into three stages. We apply the local volatility model, stochastic volatility model, and local volatility jump-diffusion model estimated by the proposed method to KOSPI 200 index option pricing. The proposed method displays good estimation and prediction performance. (C) 2017 Elsevier B.V. All rights reserved.
- Files in This Item
- There are no files associated with this item.
- Appears in
Collections - 사회과학대학 > 응용통계학과 > 1. Journal Articles
![qrcode](https://api.qrserver.com/v1/create-qr-code/?size=55x55&data=https://scholarworks.bwise.kr/gachon/handle/2020.sw.gachon/4058)
Items in ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.