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Fitting prices with a complete model

delete2006-01-01
delete7
PRE
AI
G
Gianna Figà‐Talamanca
M
Maria Letizia Guerra
DOI：10.1016/j.jbankfin.2005.02.011delete
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Abstract

Abstract

En 中文
The aim of this paper is to introduce some methodologies for parameter estimation in Hobson and Rogers stochastic volatility model (1998). We pay a specific attention to the so-called feedback parameter, which is shown to be crucial for the model to fit correctly the smile curve of implied volatility and we introduce different procedures for the estimation of the volatility parameters. We finally test the pricing capability of the model on market options prices on the FTSE100 and the S&P500 Indexes, according to the estimation methodologies introduced. (c) 2005 Elsevier B.V. All rights reserved.
Keywords:
option pricing
complete market
stochastic volatility

Journal

J
Journal of Banking and Finance
IF:
3.8
Papers:
6.4K
Citations:
2.4W

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No organization information available