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Abstrakty
In this paper we show that in the lognormal discrete-time stochastic volatility model with predictable conditional expected returns, the conditional expected value of the discounted payoff of a European call option is infinite. Our empirical illustration shows that the characteristics of the predictive distributions of the discounted payoffs, obtained using Monte Carlo methods, do not indicate directly that the expected discounted payoffs are infinite. (original abstract)
Rocznik
Tom
Numer
Strony
71--79
Opis fizyczny
Twórcy
autor
- Cracow University of Economics, Poland
Bibliografia
- [1] Amin K.I., Ng V.K., (1993), Option Valuation with Systematic Stochastic Volatility, The Journal of Finance 48, 881-910.
- [2] Black F., Scholes M., (1973), The Pricing of Options and Corporate Liabilities, Journal of Political Economy 81, 637-654.
- [3] Duan J. -C., (1995), The GARCH Option Pricing Model, Mathematical Finance 5, 13-32.
- [4] Duan J. -C., (1999), Conditionally Fat-Tailed Distributions and the Volatility Smile in Options, working paper, http://www.bm.ust.hk/jeduan.
- [5] Hull J., White A., (1987), The Pricing of Options on Assets with Stochastic Volatilities, Journal of Finance 42, 281-300.~
- [6] Jacquier E., Polson N., Rossi P., (2004), Bayesian Analysis of Stochastic Volatility Models with Fat-Tails and Correlated Errors, Journal of Econometrics 122, 185-212.
- [7] Jiang G.J., (2007), Stochastic Volatility and Option Pricing, [in:] Forecasting Volatility in the Financial Market, [ed.:] J.L. Knight, S.E. Satchell, Third edition, London: Butterworth Hernemann, 131-171
- [8] Jiang G.J., van der Sluis P.J., (1999), Index Option Pricing Models with Stochastic Volatility and Stochastic Interest Rates, European Finance Review 3, 273-310.
- [9] Mahieu R.J., Schotman P.C., (1998), An Emprical Application of Stochastic Volatility Models, Journal of Applied Econometrics 13, 333-360.
- [10] Pajor A., (2003), Procesy zmiennosci stochastycznej w bayesowskiej analizie finansowych szeregów czasowych (Stochastic Volatility Processes in Bayesian Analysis of Financial Time Series), doctoral dissertation (in Polish), published by Cracow University of Economics, Kraków.
- [11] Pajor A., (2007), Bayesian Option Pricing with Stochastic Volatility and Stochastic interest Rate, [in:] 33-rd International Conference MACROMODELS'06, [ed.:] W. Welfe, A. Welfe, Absolwent, Łódz, 65-88.
- [12] Psychoyios D., Skiadopoulos G., Alexakis P., (2003), A Review of Stochastic Volatility Processes: Properties and Implications, Journal of Risk Finance 4, 43-59.
Typ dokumentu
Bibliografia
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bwmeta1.element.ekon-element-000169317508