Heath Jarrow And Morton Implied Volatility Functions And Conditional Heteroskedasticity Models
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Author | : Kaushik I. Amin |
Publisher | : |
Total Pages | : |
Release | : 1998 |
Genre | : |
ISBN | : |
We evaluate various popular models of interest rate volatility and the Heath-Jarrow-Morton (HJM) approach to value interest rate derivatives by studying the information content and the forecast ability of HJM implied volatility in the Eurodollar futures options market. Implied volatility corresponding to the Ho-Lee, Courtadon, Cox-Ingersoll-Ross, Vasicek, and a linear proportional volatility model are examined within the HJM framework. The exercise compares these implied volatilities to a number of historical volatility benchmarks based on the GARCH model, the Glosten-Jagannathan-Runkle model, and several hybrid models combining the Cox-Ingersoll-Ross and Courtadon spot rate models and the GARCH and GJR approaches to model interest rate volatility. Our results show that there is a strong interaction effect between return shocks and the level of the interest rates in the volatility dynamics that none of the existing HJM volatility models and none of the GARCH type models can fully capture. Specifically, the impact of a shock to interest rate volatility is higher under a high interest rate than a low interest rate. The importance of implied volatility from the Ho-Lee, Courtadon, and Cox-Ingersoll-Ross models is significantly reduced after a term capturing the interaction effect is added to the volatility specification. The importance of implied volatility from the linear proportional and the Vasicek models is reduced but they can still explain a reasonably large portion of the time-variation in volatility.
Author | : I-Doun Terry Kuo |
Publisher | : |
Total Pages | : 253 |
Release | : 2002 |
Genre | : |
ISBN | : |
Author | : Anjun Zhou |
Publisher | : |
Total Pages | : 36 |
Release | : 2000 |
Genre | : |
ISBN | : |
Based on the nonparametric study of Pearson and Zhou (1999), a parametric HJM model is developed for the forward rate volatility. It allows the volatility of the forward rate with different maturities to react in a different way with the level of forward rate and the forward spread. Specifically, the proposed forward rate volatility function is imbedded into GARCH family models and compared with several widely used HJM volatility specifications. It is shown that the proposed volatility specification performs the best. It is also confirmed that the volatility of forward rate with different maturities depends on the forward rate and the forward spread in a different way.
Author | : Luc Bauwens |
Publisher | : John Wiley & Sons |
Total Pages | : 566 |
Release | : 2012-03-22 |
Genre | : Business & Economics |
ISBN | : 1118272056 |
A complete guide to the theory and practice of volatility models in financial engineering Volatility has become a hot topic in this era of instant communications, spawning a great deal of research in empirical finance and time series econometrics. Providing an overview of the most recent advances, Handbook of Volatility Models and Their Applications explores key concepts and topics essential for modeling the volatility of financial time series, both univariate and multivariate, parametric and non-parametric, high-frequency and low-frequency. Featuring contributions from international experts in the field, the book features numerous examples and applications from real-world projects and cutting-edge research, showing step by step how to use various methods accurately and efficiently when assessing volatility rates. Following a comprehensive introduction to the topic, readers are provided with three distinct sections that unify the statistical and practical aspects of volatility: Autoregressive Conditional Heteroskedasticity and Stochastic Volatility presents ARCH and stochastic volatility models, with a focus on recent research topics including mean, volatility, and skewness spillovers in equity markets Other Models and Methods presents alternative approaches, such as multiplicative error models, nonparametric and semi-parametric models, and copula-based models of (co)volatilities Realized Volatility explores issues of the measurement of volatility by realized variances and covariances, guiding readers on how to successfully model and forecast these measures Handbook of Volatility Models and Their Applications is an essential reference for academics and practitioners in finance, business, and econometrics who work with volatility models in their everyday work. The book also serves as a supplement for courses on risk management and volatility at the upper-undergraduate and graduate levels.
Author | : |
Publisher | : |
Total Pages | : 452 |
Release | : 1999 |
Genre | : Derivative securities |
ISBN | : |
Author | : |
Publisher | : |
Total Pages | : 408 |
Release | : 1997-12-05 |
Genre | : Business & Economics |
ISBN | : |
The 12 articles presented in this book have different approaches for the modelling of economic and financial processes. The topics cover a range of subjects (complex dynamics, nonlinear time series models, cointegration) and applications in the field of finance and macro economics. The articles are grouped according to the methods being applied. In the first group the authors are concerned with nonlinear dynamics; the papers in the second group are more empirically oriented; the last group contains papers on time series modelling in macro economics, with special attention for the aspect of nonstationarity. The book is intended to be one of discussion and debate on themes of common interest in economics, finance and dynamical systems. It examines the different approaches for the modelling of economic and financial processes so as to stimulate the communication of ideas and to overcome the barriers of specialization.
Author | : Bernard Dumas |
Publisher | : |
Total Pages | : 34 |
Release | : 1996 |
Genre | : Finance |
ISBN | : 9782854185676 |
Author | : Carl Chiarella |
Publisher | : |
Total Pages | : 22 |
Release | : 2000 |
Genre | : Interest rate futures |
ISBN | : |
Author | : Carl Chiarella |
Publisher | : Springer |
Total Pages | : 616 |
Release | : 2015-03-25 |
Genre | : Business & Economics |
ISBN | : 366245906X |
The book presents applications of stochastic calculus to derivative security pricing and interest rate modelling. By focusing more on the financial intuition of the applications rather than the mathematical formalities, the book provides the essential knowledge and understanding of fundamental concepts of stochastic finance, and how to implement them to develop pricing models for derivatives as well as to model spot and forward interest rates. Furthermore an extensive overview of the associated literature is presented and its relevance and applicability are discussed. Most of the key concepts are covered including Ito’s Lemma, martingales, Girsanov’s theorem, Brownian motion, jump processes, stochastic volatility, American feature and binomial trees. The book is beneficial to higher-degree research students, academics and practitioners as it provides the elementary theoretical tools to apply the techniques of stochastic finance in research or industrial problems in the field.
Author | : Frank J. Fabozzi |
Publisher | : John Wiley & Sons |
Total Pages | : 530 |
Release | : 2002-11-29 |
Genre | : Business & Economics |
ISBN | : 047144698X |
This ultimate guide contains an excellent blend of theory and practice This comprehensive guide covers various aspects of model building for fixed income securities and derivatives. Filled with expert advice, valuable insights, and advanced modeling techniques, Interest Rate, Term Structure, and Valuation Modeling is a book that all institutional investors, portfolio managers, and risk professionals should have. John Wiley & Sons, Inc. is proud to be the publisher of the esteemed Frank J. Fabozzi Series. Comprising nearly 100 titles-which include numerous bestsellers—The Frank J. Fabozzi Series is a key resource for finance professionals and academics, strategists and students, and investors. The series is overseen by its eponymous editor, whose expert instruction and presentation of new ideas have been at the forefront of financial publishing for over twenty years. His successful career has provided him with the knowledge, insight, and advice that has led to this comprehensive series. Frank J. Fabozzi, PhD, CFA, CPA, is Editor of the Journal of Portfolio Management, which is read by thousands of institutional investors, as well as editor or author of over 100 books on finance for the professional and academic markets. Currently, Dr. Fabozzi is an adjunct Professor of Finance at Yale University's School of Management and on the board of directors of the Guardian Life family of funds and the Black Rock complex of funds.