Volatility Estimation via Jump Indicator

R. Aboulaich, H. Ben Ameur and M. Lamarti Sefian

Modern Applied Science, 2014, vol. 8, issue 2, 12

Abstract: The volatility is considered constant in Black and Scholes model. However, this implausible assumption leads to an undervaluation of options. We try to remediate to this drawback considering a more realistic model where the volatility is a piecewise constant function of time. We introduce a jump indicator to locate iteratively discontinuities of volatility and use an optimization process to estimate volatility values. We compare our results with regularization method (Aboulaich & Medarhri, 2013) and "AutoRegressive Conditional Heteroskedasticity" ARCH method (Engle, 1982).

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ccsenet.org/journal/index.php/mas/article/download/30693/19619 (application/pdf)
https://ccsenet.org/journal/index.php/mas/article/view/30693 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibn:masjnl:v:8:y:2014:i:2:p:12

Access Statistics for this article

More articles in Modern Applied Science from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education ().