Jump diffusion
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Which model for equity derivatives?
Analysing common processes used to model energy prices
An introduction to energy spot price processes
Event risk modelling for equities
Event risk modelling for equities
Event risk modelling for equities
Event risk modelling for equities
Smiling jumps
Smiling jumps
Cutting Edge: Pure jump models for energy prices
Université de Lausanne’s Roberto Marfè investigates pure jump processes as modelling blocks for the distributions of energy returns under the pricing measure. An easy-to-implement option-implied approach is outlined, which circumvents most of the…
Parameter estimation with k-means clustering
Ever since the pioneering work of Cox, Ross & Rubinstein (1979), tree models have been popular as an asset pricing method. However, statistical estimation of the parameters of tree models has been less studied. In this article, Kiseop Lee and Mingxin Xu…
Vix option pricing in a jump-diffusion model
Artur Sepp discusses Vix futures and options and shows that their market prices exhibit positive volatility skew. To better model the market behaviour of the S&P 500 index and its associated volatility skew, he introduces the stochastic dynamics of the…
Jumps as components in the pricing of credit and equity products
The equity and credit markets have become increasingly integrated over recent years. This has increased the need for models and tools that allow traders to hedge their risk simultaneously in the two markets. Here, Daniel Bloch presents an approach that…
Unifying volatility models
This article introduces a method for building analytically tractable option pricing models that combine state-dependent volatility, stochastic volatility and jumps. The eigenfunction expansion method is used to add jumps and stochastic volatility to…
Why be backward?
Originally developed as a tool for calibrating smile models, so-called forward methods can also be used to price options and derive Greeks. Here, Peter Carr and Ali Hirsa apply the technique to the pricing of continuously exercisable American-style put…
Assets with jumps
Option pricing
Universal Barriers
As our survey in this issue shows, there is an increasing volume of barrier products traded in the forex options market. Here, Alexander Lipton and William McGhee discuss the pricing of barriers under various model frameworks, with particular focus on…
Jumping smiles
Options
Optional events and jumps
Masterclass – with JP Morgan