An investigation of model risk in a market with jumps and stochastic volatility

DOI10.1016/j.ejor.2016.03.018zbMath1346.91263OpenAlexW3121383627MaRDI QIDQ323232

Guillaume Coqueret, Bertrand Tavin

Publication date: 7 October 2016

Published in: European Journal of Operational Research (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.ejor.2016.03.018

zbMATH Keywords

model riskrisk managementrobustness and sensitivity analysisvariance swapforward-start option

Mathematics Subject Classification ID

Statistical methods; risk measures (91G70) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items

Measuring the unmeasurable: an application of uncertainty quantification to Treasury bond portfolios, Practice-relevant model validation: distributional parameter risk analysis in financial model risk management, MEASURING MODEL RISK IN FINANCIAL RISK MANAGEMENT AND PRICING, EQUILIBRIUM PRICE OF VARIANCE SWAPS UNDER STOCHASTIC VOLATILITY WITH LÉVY JUMPS AND STOCHASTIC INTEREST RATE, Multivariate FX models with jumps: triangles, quantos and implied correlation, A general framework for discretely sampled realized variance derivatives in stochastic volatility models with jumps, A data-driven framework for consistent financial valuation and risk measurement, Measuring exposure to dependence risk with random Bernstein copula scenarios, VIX derivatives, hedging and vol-of-vol risk, Model risk in the over-the-counter market, Smiles \& smirks: volatility and leverage by jumps

Cites Work

• A Jump-Diffusion Model for Option Pricing
• Variance swap with mean reversion, multifactor stochastic volatility and jumps
• Processes of normal inverse Gaussian type
• Variance swaps on time-changed Lévy processes
• On the pricing of forward starting options in Heston's model on stochastic volatility
• Worst-case robust Omega ratio
• Assessing financial model risk
• On the density of log-spot in the Heston volatility model
• Worst-case robust decisions for multi-period mean-variance portfolio optimization
• Non-Gaussian Ornstein–Uhlenbeck-based Models and Some of Their Uses in Financial Economics
• Coherent Measures of Risk
• EQUITY CORRELATIONS IMPLIED BY INDEX OPTIONS: ESTIMATION AND MODEL UNCERTAINTY ANALYSIS
• A Theory of the Term Structure of Interest Rates
• The Shape and Term Structure of the Index Option Smirk: Why Multifactor Stochastic Volatility Models Work So Well
• Risk minimization in stochastic volatility models: model risk and empirical performance
• Normal Inverse Gaussian Distributions and Stochastic Volatility Modelling
• Lévy processes, polynomials and martingales
• Model risk of contingent claims
• Prices and Asymptotics for Discrete Variance Swaps
• Stochastic Volatility for Lévy Processes
• Financial Modelling with Jump Processes
• A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
• MODEL UNCERTAINTY AND ITS IMPACT ON THE PRICING OF DERIVATIVE INSTRUMENTS