MULTIVARIATE FACTOR-BASED PROCESSES WITH SATO MARGINS

Marina Marena, Andrea Romeo () and Patrizia Semeraro
Additional contact information
Andrea Romeo: Department of Economics and Statistics, Universitá di Torino, c.so Unione Sovietica 218bis, Torino, Italia

International Journal of Theoretical and Applied Finance (IJTAF), 2018, vol. 21, issue 01, 1-30

Abstract: We introduce a class of multivariate factor-based processes with the dependence structure of Lévy ρα-models and Sato marginal distributions. We focus on variance gamma and normal inverse Gaussian marginal specifications for their analytical tractability and fit properties. We explore if Sato models, whose margins incorporate more realistic moments term structures, preserve the correlation flexibility in fitting option data. Since ρα-models incorporate nonlinear dependence, we also investigate the impact of Sato margins on nonlinear dependence and its evolution over time. Further, the relevance of nonlinear dependence in multivariate derivative pricing is examined.

Keywords: Multivariate asset models; Lévy processes; Sato processes; nonlinear dependence (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S021902491850005X
Access to full text is restricted to subscribers

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:wsi:ijtafx:v:21:y:2018:i:01:n:s021902491850005x

Ordering information: This journal article can be ordered from

DOI: 10.1142/S021902491850005X

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().