Model-based pricing for financial derivatives

doi:10.1016/j.jeconom.2015.02.030

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	Model-based pricing for financial derivatives
	Zhu, Ke1 ; Ling, Shiqing 2
	2015-08-01
发表期刊	JOURNAL OF ECONOMETRICS
ISSN	0304-4076
卷号	187 期号:2 页码:447-457
摘要	Assume that S-t is a stock price process and B-t is a bond price process with a constant continuously compounded risk-free interest rate, where both are defined on an appropriate probability space P. Let y(t) = log(S-t/St-1). yt can be generally decomposed into a conditional mean plus a noise with volatility components, but the discounted S-t is not a martingale under P. Under a general framework, we obtain a risk-neutralized measure Q under which the discounted St is a martingale in this paper. Using this measure, we show how to derive the risk neutralized price for the derivatives. Special examples, such as NGARCH, EGARCH and GJR pricing models, are given. Simulation study reveals that these pricing models can capture the "volatility skew" of implied volatilities in the European option. A small application highlights the importance of our model-based pricing procedure. (C) 2015 Elsevier B.V. All rights reserved.
关键词	NGARCH EGARCH and GJR models Non-normal innovation Option valuation Risk neutralized measure Volatility skew
DOI	10.1016/j.jeconom.2015.02.030
语种	英语
资助项目	Hong Kong Research Grants Commission[HKUST641912] ; Hong Kong Research Grants Commission[HKUST603413] ; National Natural Science Foundation of China[11201459] ; National Natural Science Foundation of China[11371354] ; Chinese Academy of Sciences[2014-cjrwlzx-zk] ; Key Laboratory of RCSDS ; President Fund of the Academy of Mathematics and System Science
WOS研究方向	Business & Economics ; Mathematics ; Mathematical Methods In Social Sciences
WOS类目	Economics ; Mathematics, Interdisciplinary Applications ; Social Sciences, Mathematical Methods
WOS记录号	WOS:000357348300005
出版者	ELSEVIER SCIENCE SA
引用统计
文献类型	期刊论文
条目标识符	http://ir.amss.ac.cn/handle/2S8OKBNM/20233
专题	国家数学与交叉科学中心
通讯作者	Ling, Shiqing
作者单位	1.Chinese Acad Sci, Inst Appl Math, Beijing, Peoples R China 2.Hong Kong Univ Sci & Technol, Dept Math, Kowloon, Hong Kong, Peoples R China
推荐引用方式 GB/T 7714	Zhu, Ke,Ling, Shiqing. Model-based pricing for financial derivatives[J]. JOURNAL OF ECONOMETRICS,2015,187(2):447-457.
APA	Zhu, Ke,&Ling, Shiqing.(2015).Model-based pricing for financial derivatives.JOURNAL OF ECONOMETRICS,187(2),447-457.
MLA	Zhu, Ke,et al."Model-based pricing for financial derivatives".JOURNAL OF ECONOMETRICS 187.2(2015):447-457.