Estimating a stochastic volatility model for DAX-Index options

Freo, Marzia (2003) Estimating a stochastic volatility model for DAX-Index options. Bologna, IT: Dipartimento di Scienze Statistiche "Paolo Fortunati", Alma Mater Studiorum Università di Bologna, p. 17. DOI 10.6092/unibo/amsacta/2285. In: Quaderni di Dipartimento. Serie Ricerche ISSN 1973-9346.
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Abstract

The paper examines alternative strategies for pricing and hedging options on German DAX-index. To this purpose an affine stochastic volatility model is estimated directly on objective probability system through a three step approach. Errors obtained by the implementation of the stochastic volatility model and Black and Scholes with different historical and implied volatility measures are compared and the performance is evaluated in terms of out-of-sample pricing and hedging. The results for DAX-index options market support the estimation on the affine stochastic volatility model in pricing as well as in hedging procedures.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Freo, Marzia
Subjects
ISSN
1973-9346
DOI
Deposit date
08 Jan 2007
Last modified
16 May 2011 12:04
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