Learning Centre

The integrated volatility implied by option prices, a Bayesian approach

 |  Login

Show simple item record

dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en
dc.contributor.author Kaila, Ruth
dc.date.accessioned 2012-08-17T10:06:59Z
dc.date.available 2012-08-17T10:06:59Z
dc.date.issued 2008
dc.identifier.isbn 978-951-22-9316-2
dc.identifier.isbn 978-951-22-9315-5 (printed) #8195;
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/4483
dc.description.abstract In this thesis, we present the new concept of implied integrated volatility. When the stock price volatility is stochastic, the integrated volatility is the time-average of the stock price variance. This volatility is a fundamental quantity in option theory, as the stock price returns depend on the stock price volatility only via the integrated volatility. The implied integrated volatility is the integrated volatility implied by option Hull-White prices. It is a stochastic extension of the Black-Scholes implied volatility. Unlike the latter, however, it is independent of the strike price of options. We suggest that this volatility can be used in volatility estimation, in pricing illiquid options consistently with corresponding liquid ones, and in hedging options. Estimating the implied integrated volatility is an ill-posed inverse problem. We present methods to estimate it within a Bayesian framework. This approach provides us with not only a point estimate, but also the possibility to gauge the reliability of this estimate. en
dc.format.extent Verkkokirja (681 KB, 102 s.)
dc.format.mimetype application/pdf
dc.language.iso en en
dc.publisher Teknillinen korkeakoulu en
dc.relation.haspart [Errata file]: Errata en
dc.subject.other Finance en
dc.title The integrated volatility implied by option prices, a Bayesian approach en
dc.type G4 Monografiaväitöskirja fi
dc.contributor.department Matematiikan laitos fi
dc.subject.keyword implied integrated volatility en
dc.subject.keyword stochastic volatility en
dc.subject.keyword quadratic variation en
dc.subject.keyword Bayesian inference en
dc.subject.keyword MCMC sampling en
dc.subject.keyword hypermodel en
dc.identifier.urn URN:ISBN:978-951-22-9316-2
dc.type.dcmitype text en
dc.type.ontasot Väitöskirja (monografia) fi
dc.type.ontasot Doctoral dissertation (monograph) en
local.aalto.digifolder Aalto_67226
local.aalto.digiauth ask

Files in this item

This item appears in the following Collection(s)

Show simple item record

Search archive

Advanced Search

article-iconSubmit a publication