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52,879
The multi-strike case
, 2008
"... Arbitrage-free market models for option prices: The multi-strike case ..."
Constructing Arbitrage-free Binomial Models
, 2004
"... Discussion Paper No. 530 In the past decades several versions of the binomial model for option pricing, origi-nally introduced by COX, ROSS, AND RUBINSTEIN, have been discussed in the finance literature. Some of these approaches model an arbitrage-free market in the discrete setup whereas others att ..."
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Discussion Paper No. 530 In the past decades several versions of the binomial model for option pricing, origi-nally introduced by COX, ROSS, AND RUBINSTEIN, have been discussed in the finance literature. Some of these approaches model an arbitrage-free market in the discrete setup whereas others
INTERNAL MODELS AND ARBITRAGE–FREE CALIBRATION
"... There is a major trend in the insurance sector towards arbitrage-free valuation of insurance liabilities and assets. The assumption of no-arbitrage is fundamental in financial modelling. This paper surveys assumptions of arbitragefree modelling and studies their consequences for the use of internal ..."
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model in insurance. The model uncertainty arises as a particularly severe problem under the assumption that the conditions of arbitrage-free complete market theory do not hold and all participants in the market are not fully rational. We argue that the approximation errors of these idealistic
An arbitrage-free method for smile extrapolation
"... A robust method for pricing options at strikes where there is not an observed price is a vital tool for the pricing, hedging, and risk management of derivatives. All institutions that trade derivatives will have an approach to this task. Typical examples might be a simple interpolation scheme across ..."
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extrapolation that is robust, simple, fast and offers control on the form of the tails in the distribution. Using this method allows distribution-sensitive products such as CMS rates or inverse-FX options to be priced consistently with the smile of traded vanilla options. The resulting arbitrage-free
Arbitrage-free models in markets with transaction costs
- Elect. Comm. Probab
, 2011
"... Abstract In the paper ..."
Empirical Implications Of Arbitrage-Free Asset Markets
, 1993
"... The martingale-equivalence condition delivered by a noarbitrage assumption in complete asset markets has implications for fine-time-unit asset price behavior that can be rejected with finite spans of data. A class of stochastic processes that could model such deviations from martingale-equivale ..."
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The martingale-equivalence condition delivered by a noarbitrage assumption in complete asset markets has implications for fine-time-unit asset price behavior that can be rejected with finite spans of data. A class of stochastic processes that could model such deviations from martingale
Characterizing attainable claims: a new proof
, 2010
"... Abstract. This short note offers a new proof of the following fact: in a discrete-time arbitrage-free market model, a contingent claim is attainable if and only if its expected value is the same under all equivalent martingale measures. The proof is based on Rogers’ proof [9] of the Dalang–Morton–Wi ..."
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Cited by 3 (1 self)
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Abstract. This short note offers a new proof of the following fact: in a discrete-time arbitrage-free market model, a contingent claim is attainable if and only if its expected value is the same under all equivalent martingale measures. The proof is based on Rogers’ proof [9] of the Dalang
How Arbitrage-Free is the Nelson-Siegel Model?
, 2007
"... We test whether the Nelson and Siegel (1987) yield curve model is arbitrage-free in a statistical sense. Theoretically, the Nelson-Siegel model does not ensure the absence of arbitrage opportunities, as shown by Bjork and Christensen (1999). Still, central banks and public wealth managers rely heavi ..."
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Cited by 4 (0 self)
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We test whether the Nelson and Siegel (1987) yield curve model is arbitrage-free in a statistical sense. Theoretically, the Nelson-Siegel model does not ensure the absence of arbitrage opportunities, as shown by Bjork and Christensen (1999). Still, central banks and public wealth managers rely
A yield-factor model of interest rates
- Math. Finance
, 1996
"... This paper presents a consistent and arbitrage-free multifactor model of the term structure of interest rates in which yields at selected fixed maturities follow a parametric multivariate Markov diffusion process with “stochastic volatility. ” The yield of any zero-coupon bond is taken to be a matur ..."
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Cited by 665 (23 self)
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This paper presents a consistent and arbitrage-free multifactor model of the term structure of interest rates in which yields at selected fixed maturities follow a parametric multivariate Markov diffusion process with “stochastic volatility. ” The yield of any zero-coupon bond is taken to be a
Modeling and Forecasting Realized Volatility
, 2002
"... this paper is built. First, although raw returns are clearly leptokurtic, returns standardized by realized volatilities are approximately Gaussian. Second, although the distributions of realized volatilities are clearly right-skewed, the distributions of the logarithms of realized volatilities are a ..."
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Cited by 549 (50 self)
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within a standard frictionless arbitrage-free multivariate pricing environment. In section 3 we discuss the practical construction of realized volatilities from high-frequency foreign exchange returns. Next, in section 4 we summarize the salient distributional features of r...
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52,879
