Utilize este identificador para referenciar este registo: http://hdl.handle.net/10400.21/1422
Título: Model risk in the pricing of exotic options
Autor: Marabel Romo, Jacinto
Crespo Espert, José Luis
Palavras-chave: Model risk
Exotic options
Local volatility
Stochastic volatility
Variance Gamma process
Path dependence
Data: Jul-2011
Resumo: The growth experimented in recent years in both the variety and volume of structured products implies that banks and other financial institutions have become increasingly exposed to model risk. In this article we focus on the model risk associated with the local volatility (LV) model and with the Variance Gamma (VG) model. The results show that the LV model performs better than the VG model in terms of its ability to match the market prices of European options. Nevertheless, both models are subject to significant pricing errors when compared with the stochastic volatility framework.
Peer review: yes
URI: http://hdl.handle.net/10400.21/1422
Aparece nas colecções:ISCAL - Comunicações

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