Bayesian Forecasting of the Discounted Payoff of Options on WIG20 Index under Stochastic Volatility and Stochastic Interest Rates

• Autorzy: Anna Pajor
• Języki publikacji: EN

Abstrakty

EN

The aim of the paper is to check whether allowing interest rates to be stochastic improves forecasting performance of the discounted payoff of options on the WIG20 index. We compare the results obtained in the option pricing model under stochastic volatility and stochastic interest rate (allowing the interest rate to follow an SV process) with those in constant interest rate model (an univariate SV model for the underlying asset). The structure of the article is as follows: section 2 consists of a short presentation of the Bayesian univariate SV model with correlated errors, section 3 includes a brief presentation of the Bayesian bivariate SV model, section 4 focuses on the Bayesian forecasting of the discounted payoff of a European call option, section 5 presents the posterior results connected with options on the WIG20 index, and finally, section 6 incorporates the conclusions. (fragment of text)

Słowa kluczowe

EN

Bayesian inference; Options pricing; Stock market indexes

PL

Wnioskowanie bayesowskie; Wycena opcji; Indeks giełdowy

• Czasopismo: Dynamic Econometric Models
• Rocznik: 2008
• Tom: 8
• Strony: 147--154

Twórcy

autor

Anna Pajor

• Cracow University of Economics, Poland

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