|
EconStor >
Humboldt-Universität Berlin >
Sonderforschungsbereich 649: Ökonomisches Risiko, Humboldt-Universität Berlin >
SFB 649 Discussion Papers, HU Berlin >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/25039
|
| | |
Full metadata record
| DC Field | | Value | | Language |
| dc.contributor.author | | Fengler, Matthias R. | | en_US |
| dc.contributor.author | | Härdle, Wolfgang Karl | | en_US |
| dc.contributor.author | | Mammen, Enno | | en_US |
| dc.date.accessioned | | 2005-08-15 | | en_US |
| dc.date.accessioned | | 2009-07-23T14:42:53Z | | - |
| dc.date.available | | 2009-07-23T14:42:53Z | | - |
| dc.date.issued | | 2005 | | en_US |
| dc.identifier.uri | | http://hdl.handle.net/10419/25039 | | - |
| dc.description.abstract | | A primary goal in modelling the implied volatility surface (IVS) for pricing and hedging aims at reducing complexity. For this purpose one fits the IVS each day and applies a principal component analysis using a functional norm. This approach, however, neglects the degenerated string structure of the implied volatility data and may result in a modelling bias. We propose a dynamic semiparametric factor model (DSFM), which approximates the IVS in a finite dimensional function space. The key feature is that we only fit in the local neighborhood of the design points. Our approach is a combination of methods from functional principal component analysis and backfitting techniques for additive models. The model is found to have an approximate 10% better performance than a sticky moneyness model. Finally, based on the DSFM, we devise a generalized vega-hedging strategy for exotic options that are priced in the local volatility framework. The generalized vega-hedging extends the usual approaches employed in the local volatility framework. | | en_US |
| dc.language.iso | | eng | | en_US |
| dc.publisher | | SFB 649, Economic Risk Berlin | | en_US |
| dc.relation.ispartofseries | | SFB 649 discussion paper 2005,020 | | en_US |
| dc.subject.jel | | C14 | | en_US |
| dc.subject.jel | | G12 | | en_US |
| dc.subject.ddc | | 330 | | en_US |
| dc.subject.keyword | | smile | | en_US |
| dc.subject.keyword | | local volatility | | en_US |
| dc.subject.keyword | | generalized additive model | | en_US |
| dc.subject.keyword | | backfitting | | en_US |
| dc.subject.keyword | | functional principal component analysis | | en_US |
| dc.title | | A dynamic semiparametric factor model for implied volatility string dynamics | | en_US |
| dc.type | | Working Paper | | en_US |
| dc.identifier.ppn | | 496022024 | | en_US |
| dc.rights | | http://www.econstor.eu/dspace/Nutzungsbedingungen | | - |
| Appears in Collections: | | SFB 649 Discussion Papers, HU Berlin
|
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.
|