We propose a class of discrete-time stochastic volatility models that, in a parsimonious way, capture the time-varying higher moments observed in financial series. Three desirable results are obtained. First, we have a recursive procedure for the log-price characteristic function which allows a semi-analytical formula for option prices as in Heston and Nandi (Rev Financ Stud 13(3):585–625, 2000). Second, we reproduce some features of the VIX Index. Finally, we derive a simple formula for the VIX index and use it for option pricing.

Hitaj, A., Mercuri, L., Rroji, E. (2018). VIX computation based on affine stochastic volatility models in discrete time. In G. Consigli, S. Stefani, G. Zambruno (a cura di), Handbook of Recent Advances in Commodity and Financial Modeling Quantitative Methods in Banking, Finance, Insurance, Energy and Commodity Markets (pp. 141-164). Springer [10.1007/978-3-319-61320-8_7].

VIX computation based on affine stochastic volatility models in discrete time

Hitaj, A.
Primo
;
Rroji, E.
Ultimo
2018

Abstract

We propose a class of discrete-time stochastic volatility models that, in a parsimonious way, capture the time-varying higher moments observed in financial series. Three desirable results are obtained. First, we have a recursive procedure for the log-price characteristic function which allows a semi-analytical formula for option prices as in Heston and Nandi (Rev Financ Stud 13(3):585–625, 2000). Second, we reproduce some features of the VIX Index. Finally, we derive a simple formula for the VIX index and use it for option pricing.
Capitolo o saggio
Affine stochastic volatility; Implied volatility surface; VIX;
English
Handbook of Recent Advances in Commodity and Financial Modeling Quantitative Methods in Banking, Finance, Insurance, Energy and Commodity Markets
Consigli, G; Stefani, S; Zambruno, G
30-set-2017
2018
9783319613185
257
Springer
141
164
Hitaj, A., Mercuri, L., Rroji, E. (2018). VIX computation based on affine stochastic volatility models in discrete time. In G. Consigli, S. Stefani, G. Zambruno (a cura di), Handbook of Recent Advances in Commodity and Financial Modeling Quantitative Methods in Banking, Finance, Insurance, Energy and Commodity Markets (pp. 141-164). Springer [10.1007/978-3-319-61320-8_7].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/180597
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