Leverage and Feedback Effects on Multifactor Wishart Stochastic Volatility for Option Pricing

Arbeitspapier

The paper proposes a general asymmetric multifactor Wishart stochastic volatility (AMWSV) diffusion process which accommodates leverage, feedback effects and multifactor for the covariance process. The paper gives the closed-form solution for the conditional and unconditional Laplace transform of the AMWSV models. The paper also suggests estimating the AMWSV model by the generalized method of moments using information not only of stock prices but also of realized volatilities and co-volatilities. The empirical results for the bivariate data of the NASDAQ 100 and S&P500 indices show that the general AMWSV model is preferred among several nested models.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 13-003/III

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Construction and Estimation ; Contingent Pricing; Futures Pricing; option pricing
• Subject: Multivariate Stochastic Volatility ; Wishart Process ; Leverage Effects ; Feedback Effects ; Multifactor Model ; Option Pricing ; Optionsgeschäft ; Stochastischer Prozess ; Volatilität ; Theorie ; Schätzung ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Asai, Manabu ; McAleer, Michael
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/87237
• Last update: 10.03.2025, 11:44 AM CET