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https://hdl.handle.net/10419/66280
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DC Field | Value | Language |
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dc.contributor.author | Fengler, Matthias R. | en |
dc.contributor.author | Härdle, Wolfgang | en |
dc.contributor.author | Mammen, Enno | en |
dc.date.accessioned | 2012-11-19T15:23:21Z | - |
dc.date.available | 2012-11-19T15:23:21Z | - |
dc.date.issued | 2003 | - |
dc.identifier.pi | urn:nbn:de:kobv:11-10050885 | en |
dc.identifier.uri | http://hdl.handle.net/10419/66280 | - |
dc.description.abstract | A primary goal in modelling the dynamics of implied volatility surfaces (IVS) 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 severe modelling bias. We propose a dynamic semiparametric factor model, 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 the typical naïve trader models. The model can be a backbone in risk management serving for value at risk computations and scenario analysis. | en |
dc.language.iso | eng | en |
dc.publisher | |aHumboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes |cBerlin | en |
dc.relation.ispartofseries | |aSFB 373 Discussion Paper |x2003,54 | en |
dc.subject.jel | C14 | en |
dc.subject.jel | G12 | en |
dc.subject.ddc | 330 | en |
dc.subject.keyword | Implied Volatility Surface | en |
dc.subject.keyword | Smile | en |
dc.subject.keyword | Generalized Additive Models | en |
dc.subject.keyword | Backfitting | en |
dc.subject.keyword | Functional Principal Component Analysis | en |
dc.title | Implied volatility string dynamics | - |
dc.type | Working Paper | en |
dc.identifier.ppn | 73007675X | en |
dc.rights | http://www.econstor.eu/dspace/Nutzungsbedingungen | en |
dc.identifier.repec | RePEc:zbw:sfb373:200354 | en |
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