The path-dependent volatility model for option pricing of Hobson and Rogers is considered. The model preserves the completeness of the market and can potentially reproduce the observed smile and term structure patterns of implied volatility. A calibration procedure based on ad-hoc numerical schemes for hypoelliptic PDEs is proposed and used to quantitatively investigate the pricing performance of the model. Numerical results based on S&P500 option prices are discussed.
P. Foschi, A. Pascucci (2009). Calibration of a path-dependent volatility model: empirical tests. COMPUTATIONAL STATISTICS & DATA ANALYSIS, 53, 2219-2235 [10.1016/j.csda.2008.10.042].
Calibration of a path-dependent volatility model: empirical tests
FOSCHI, PAOLO;PASCUCCI, ANDREA
2009
Abstract
The path-dependent volatility model for option pricing of Hobson and Rogers is considered. The model preserves the completeness of the market and can potentially reproduce the observed smile and term structure patterns of implied volatility. A calibration procedure based on ad-hoc numerical schemes for hypoelliptic PDEs is proposed and used to quantitatively investigate the pricing performance of the model. Numerical results based on S&P500 option prices are discussed.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
