We propose a class of discrete-time stochastic volatility models that, in a parsimonious way, captures 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 [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.
Constructing a class of stochastic volatility models: empirical investigation with VIX data
RROJI, EDIT;MERCURI, LORENZO
2013-01-01
Abstract
We propose a class of discrete-time stochastic volatility models that, in a parsimonious way, captures 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 [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.File in questo prodotto:
Non ci sono file associati a questo prodotto.
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
