Access the full text.
Sign up today, get DeepDyve free for 14 days.
Loading next page...
/lp/oxford-university-press/a-semiparametric-factor-model-for-implied-volatility-surface-dynamics-AfzS7tSnfs
References (55)
-
R. Tompkins (2001)
Implied volatility surfaces: uncovering regularities for options on financial futuresThe European Journal of Finance, 7
-
P. Carr, H. Geman, D. Madan, M. Yor (2003)
Stochastic Volatility for Lévy ProcessesMathematical Finance, 13
-
S. Heston (1993)
A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency OptionsReview of Financial Studies, 6
-
Moshe Fridman, L. Harris (1998)
A maximum likelihood approach for non-Gaussian stochastic volatility modelsJournal of Business & Economic Statistics, 16
-
A. Harvey, E. Ruiz, N. Shephard (1994)
Multivariate stochastic variance models -
M. Benko, Matthias Fengler, W. Härdle, Miloš Kopa (2007)
On extracting information implied in optionsComputational Statistics, 22
-
Matthias Fengler, W. Härdle, Christophe Villa (2003)
The Dynamics of Implied Volatilities: A Common Principal Components ApproachReview of Derivatives Research, 6
-
David Bates (2003)
Maximum Likelihood Estimation of Latent Affine ProcessesEconometrics eJournal
-
H. Akaike (1970)
Statistical predictor identificationAnnals of the Institute of Statistical Mathematics, 22
-
Angelo Melino, S. Turnbull (1990)
Pricing foreign currency options with stochastic volatilityJournal of Econometrics, 45
-
M. Rubinstein. (1985)
Nonparametric tests of alternative option pricing models using all reported trades and quotes on the -
M. Broadie, J. Detemple, Eric Ghysels, Olivier Torrès, Polytechnique, Rob Engle, Lars Muus, Theo Nijman, Joshua Rosenberg, Université Louvain, Résumé Abstract
Série Scientifique Scientific Series Nonparametric Estimation of American Options Exercise Boundaries and Call Prices Nonparametric Estimation of American Options Exercise Boundaries and Call Prices * -
David Bates (1993)
Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Thephlx Deutschemark OptionsNBER Working Paper Series
-
G. Kauermann, G. Tutz, J. Brüderl (2005)
The survival of newly founded firms: a case‐study into varying‐coefficient modelsJournal of the Royal Statistical Society: Series A (Statistics in Society), 168
-
T. Andersen, H. Chung, Bent Sørensen (1999)
Efficient method of moments estimation of a stochastic volatility model: A Monte Carlo studyJournal of Econometrics, 91
-
Eric Jacquier, Nicholas Polson, Peter Rossi (1994)
Bayesian Analysis of Stochastic Volatility ModelsJournal of Business & Economic Statistics, 20
-
Jun Pan (2002)
The jump-risk premia implicit in options: evidence from an integrated time-series study $Journal of Financial Economics, 63
-
Martin Wallmeier, R. Hafner (2000)
The Dynamics of DAX Implied VolatilitiesEuropean Finance eJournal
-
M. Avellaneda, Yingzi Zhu (1997)
An E-Arch Model for the Term Structure of Implied Volatility of FX OptionsDerivatives
-
C. Stone (1986)
The Dimensionality Reduction Principle for Generalized Additive ModelsAnnals of Statistics, 14
-
J. Harrison, David Kreps (1979)
Martingales and arbitrage in multiperiod securities marketsJournal of Economic Theory, 20
-
C. Taanggard, J. Nielsen, E. Mammen, O. Linton (2004)
Yield Curve Estimation by Kernel Smoothing -
S. Pastorello, V. Patilea, É. Renault (2003)
Iterative and Recursive Estimation in Structural Nonadaptive ModelsJournal of Business & Economic Statistics, 21
-
René Garcia, É. Renault (1998)
A Note on Hedging in ARCH and Stochastic Volatility Option Pricing ModelsMathematical Finance, 8
-
George Chacko, Luis Viceira (1999)
Spectral GMM Estimation of Continuous-Time ProcessesEconometrics eJournal
-
Yacine Aït-Sahalia, A. Lo (1998)
Nonparametric Estimation of State‐Price Densities Implicit in Financial Asset PricesJournal of Finance, 53
-
Mikhail Chernov, Eric Ghysels (2000)
A study towards a unified approach to the joint estimation of objective and risk neutral measures for the purpose of options valuationJournal of Financial Economics, 56
-
T. Andersen, Bent Sørensen (1996)
GMM Estimation of a Stochastic Volatility Model: A Monte Carlo StudyJournal of Business & Economic Statistics, 14
-
Yacine Ait-Sahalia, J. Duarte (2002)
Nonparametric Option Pricing Under Shape RestrictionsDerivatives
-
B. Dumas, Jeff Fleming, R. Whaley (1996)
Implied volatility functions: empirical testsIEEE/IAFE 1996 Conference on Computational Intelligence for Financial Engineering (CIFEr)
-
Ronald Gallant, George Tauchen (1998)
Reprojecting Partially Observed Systems with Application to Interest Rate DiffusionsJournal of the American Statistical Association, 93
-
F. Jamshidian, Yu Zhu (1996)
Scenario Simulation: Theory and methodologyFinance and Stochastics, 1
-
G. Schwarz (1978)
Estimating the Dimension of a ModelAnnals of Statistics, 6
-
Szymon Borak, Matthias Fengler, Wolfgang Hiirdle (2005)
DSFM fitting of implied volatility surfaces5th International Conference on Intelligent Systems Design and Applications (ISDA'05)
-
(2000)
Transform Analysis and Asset Pricing for Affine Jump-Diffusions -
G. Skiadopoulos, S. Hodges, L. Clewlow (1998)
The Dynamics of Implied Volatility Surfaces -
É. Renault, N. Touzi (1996)
Option Hedging And Implied Volatilities In A Stochastic Volatility ModelMathematical Finance, 6
-
F. Black, Myron Scholes (1973)
The Pricing of Options and Corporate LiabilitiesJournal of Political Economy, 81
-
David Bates (2000)
Post-'87 crash fears in the S&P 500 futures option marketJournal of Econometrics, 94
-
Yacine Aït-Sahalia, Yubo Wang, Francis Yared (2001)
Do option markets correctly price the probabilities of movement of the underlying assetJournal of Econometrics, 102
-
Z. Cai, Jianqing Fan, Q. Yao (2000)
Functional-Coefficient Regression Models for Nonlinear Time SeriesJournal of the American Statistical Association, 95
-
O. Barndorff-Nielsen (1997)
Normal Inverse Gaussian Distributions and Stochastic Volatility ModellingScandinavian Journal of Statistics, 24
-
D. Duffie, K. Singleton (1990)
Simulated Moments Estimation of Markov Models of Asset PricesNBER Working Paper Series
-
M. Johannes, Bjørn Eraker, Nicholas Polson (2000)
The Impact of Jumps in Volatility and ReturnsChicago Booth RPS: Econometrics & Statistics (Topic)
-
E. Mammen, O. Linton, J. Nielsen (1999)
The Existence and Asymptotic Properties of a Backfitting Projection Algorithm Under Weak ConditionsEconometrics: Econometric & Statistical Methods - General eJournal
-
Gregory Connor, Robert Korajczyk, O. Linton (2003)
The Common and Specific Components of Dynamic VolatilityEconometrics eJournal
-
Jianqing Fan, Q. Yao, Z. Cai (2000)
Adaptive varying‐coefficient linear modelsJournal of the Royal Statistical Society: Series B (Statistical Methodology), 65
-
Andrew Jeffrey, O. Linton, Thong Nguyen, P. Phillips (2001)
Nonparametric Estimation of a Multifactor Heath-Jarrow-Morton Model: An Integrated Approachdelete
-
G. Skiadopoulos, S. Hodges, L. Clewlow (2000)
The Dynamics of the S&P 500 Implied Volatility SurfaceReview of Derivatives Research, 3
-
Gregory Connor, O. Linton (2000)
Semiparametric Estimation of a Characteristic-Based Factor Model of Stock ReturnsEconometrics eJournal
-
C. Alexander, Leonardo Nogueira (2007)
Model-free hedge ratios and scale-invariant modelsJournal of Banking and Finance, 31
-
R. Schoebel, Jianwei Zhu (1998)
Stochastic Volatility With an Ornstein-Uhlenbeck Process: An ExtensionReview of Finance, 3
-
J. Hull, Alan White (1987)
The Pricing of Options on Assets with Stochastic VolatilitiesJournal of Finance, 42
-
Mark Britten-Jones, A. Neuberger (2000)
Option Prices, Implied Price Processes, and Stochastic VolatilityJournal of Finance, 55
-
Série Scientifique Scientific Series a Semi-parametric Factor Model of Interest Rates and Tests of the Affine Term Structure a Semi-parametric Factor Model of Interest Rates and Tests of the Affine Term Structure *
- Publisher
- Oxford University Press
- Copyright
- Copyright © The Author 2007. Published by Oxford University Press.
- Subject
- Articles
- ISSN
- 1479-8409
- eISSN
- 1479-8417
- DOI
- 10.1093/jjfinec/nbm005
- Publisher site
- See Article on Publisher Site
Abstract
We propose a semiparametric factor model, which approximates the implied volatility surface (IVS) in a finite dimensional function space. Unlike standard principal component approaches typically used to reduce complexity, our approach is tailored to the degenerated design of IVS data. In particular, we only fit in the local neighborhood of the design points by exploiting the expiry effect present in option data. Using DAX index option data, we estimate the nonparametric components and a low-dimensional time series of latent factors. The modeling approach is completed by studying vector autoregressive models fitted to the latent factors.
Journal
Journal of Financial Econometrics – Oxford University Press
Published: Mar 12, 2007
Keywords: functional principal component analysis implied volatility surface semiparametric factor models