Mostrar el registro sencillo del ítem
Can negative interest rates really affect option pricing? Empirical evidence from an explicitly solvable stochastic volatility model
dc.contributor.author | Recchioni, Maria Cristina | |
dc.contributor.author | Sun, Yu | |
dc.contributor.author | Tedeschi, Gabriele | |
dc.date.accessioned | 2017-04-11T15:05:10Z | |
dc.date.available | 2017-04-11T15:05:10Z | |
dc.date.issued | 2016 | |
dc.identifier.uri | http://hdl.handle.net/10234/167208 | |
dc.description | RECCHIONI, Maria Cristina; SUN, Yu; TEDESCHI, Gabriele. Can negative interest rates really affect option pricing? Empirical evidence from an explicitly solvable stochastic volatility model. Working Papers from Economics Department, Universitat Jaume I, núm. 2016/23 | |
dc.description.abstract | The profound financial crisis generated by the collapse of Lehman Brothers and the European sovereign debt crisis in 2011 have caused negative values of government bond yields both in the U.S.A. and in the EURO area. This paper investigates whether the use of models which allow for negative interest rates can improve option pricing and implied volatility forecasting. This is done with special attention to foreign exchange and index options. To this end, we carried out an empirical analysis on the prices of call and put options on the U.S. S&P 500 index and Eurodollar futures using a generalization of the Heston model in the stochastic interest rate framework. Specifically, the dynamics of the option’s underlying asset is described by two factors: a stochastic variance and a stochastic interest rate. The volatility is not allowed to be negative but the interest rate is. Explicit formulas for the transition probability density function and moments are derived. These formulas are used to estimate the model parameters efficiently. Three empirical analyses are illustrated. The first two show that the use of models which allow for negative interest rates can efficiently reproduce implied volatility and forecast option prices (i.e., S&P index and foreign exchange options). The last studies how the U.S. three-month government bond yield affects the U.S. S&P 500 index. | ca_CA |
dc.format.extent | 36 p. | ca_CA |
dc.format.mimetype | application/pdf | ca_CA |
dc.language.iso | eng | ca_CA |
dc.publisher | Universitat Jaume I. Economics Departament | ca_CA |
dc.relation.isPartOfSeries | 2016; 23 | |
dc.relation.hasVersion | RECCHIONI, Maria Cristina; SUN, Yu; TEDESCHI, Gabriele. Can negative interest rates really affect option pricing? Empirical evidence from an explicitly solvable stochastic volatility model. Quantitative Finance, 2017, p. 1-19 | |
dc.rights | This is an Author's Original Manuscript of an article whose final and definitive form, the Version of Record, has been published in the Quantitative Finance, 2017, p. 1-19 [copyright Taylor & Francis], available online at: http://www.tandfonline.com/doi/abs/10.1080/14697688.2016.1272763?journalCode=rquf20 | |
dc.rights.uri | http://rightsstatements.org/vocab/InC/1.0/ | * |
dc.subject | Finance | ca_CA |
dc.subject | Option pricing | ca_CA |
dc.subject | Stochastic volatility models | ca_CA |
dc.subject | Calibration procedure | ca_CA |
dc.title | Can negative interest rates really affect option pricing? Empirical evidence from an explicitly solvable stochastic volatility model | ca_CA |
dc.type | info:eu-repo/semantics/workingPaper | ca_CA |
dc.rights.accessRights | info:eu-repo/semantics/openAccess | ca_CA |
dc.relation.publisherVersion | http://www.doctreballeco.uji.es/wpficheros/Recchioni_et_al_23_2016.pdf | ca_CA |
dc.type.version | info:eu-repo/semantics/publishedVersion |
Ficheros en el ítem
Este ítem aparece en la(s) siguiente(s) colección(ones)
-
ECO_Articles [696]