Arbeitspapier
Good volatility, bad volatility and option pricing
Advances in variance analysis permit the splitting of the total quadratic variation of a jump diffusion process into upside and downside components. Recent studies establish that this decomposition enhances volatility predictions, and highlight the upside/downside variance spread as a driver of the asymmetry in stock price distributions. To appraise the economic gain of this decomposition, we design a new and flexible option pricing model in which the underlying asset price exhibits distinct upside and downside semi-variance dynamics driven by their model-free proxies. The new model outperforms common benchmarks, especially the alternative that splits the quadratic variation into diffusive and jump components.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Staff Working Paper ; No. 2017-52
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
- Thema
-
Asset pricing
Econometric and statistical methods
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Feunou, Bruno
Okou, Cédric
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2017
- DOI
-
doi:10.34989/swp-2017-52
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Feunou, Bruno
- Okou, Cédric
- Bank of Canada
Entstanden
- 2017
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