Quantile LASSO in arbitrage-free option markets

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F20%3A10419914" target="_blank" >RIV/00216208:11320/20:10419914 - isvavai.cz</a>

Výsledek na webu

<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=e_ZlvuHGHJ" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=e_ZlvuHGHJ</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1016/j.ecosta.2020.05.006" target="_blank" >10.1016/j.ecosta.2020.05.006</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Quantile LASSO in arbitrage-free option markets

Popis výsledku v původním jazyce

The option price function and the implied volatility surface are both key tools for the derivative pricing strategies and the financial market analysis. Modern and sophisticated methods are used but their credibility suffered due to the financial crisis in 2007-2010. Instead, a method based on a standard semiparametric smoothing is proposed and the overall complexity and robustness (with respect to various anomalies, such as bid-ask spreads, discrete ticks in price, non-synchronous trading, or even heavy tailed error distributions) is achieved by using the conditional quantile estimation. The overestimation and the sparsity principle are adopted to introduce additional flexibility and the LASSO-type penalty and the set of well-defined linear constraints are employed to produce the final estimate which complies with the arbitrage-free criteria dictated by the financial theory. The theoretical results of the model are discussed, finite sample properties are investigated via a simulation study and a practical application of the proposed method is illustrated for the Apple Inc. (AAPL) call options.

Název v anglickém jazyce

Quantile LASSO in arbitrage-free option markets

Popis výsledku anglicky

The option price function and the implied volatility surface are both key tools for the derivative pricing strategies and the financial market analysis. Modern and sophisticated methods are used but their credibility suffered due to the financial crisis in 2007-2010. Instead, a method based on a standard semiparametric smoothing is proposed and the overall complexity and robustness (with respect to various anomalies, such as bid-ask spreads, discrete ticks in price, non-synchronous trading, or even heavy tailed error distributions) is achieved by using the conditional quantile estimation. The overestimation and the sparsity principle are adopted to introduce additional flexibility and the LASSO-type penalty and the set of well-defined linear constraints are employed to produce the final estimate which complies with the arbitrage-free criteria dictated by the financial theory. The theoretical results of the model are discussed, finite sample properties are investigated via a simulation study and a practical application of the proposed method is illustrated for the Apple Inc. (AAPL) call options.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

10103 - Statistics and probability

Projekt

<a href="/cs/project/GJ18-00522Y" target="_blank" >GJ18-00522Y: Pokročilé Ekonometrické Modely pro Oceňování Opcí – AdEMOP</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Rok uplatnění

2020

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Econometrics and Statistics [online]

ISSN

2452-3062

e-ISSN

—

Svazek periodika

Neuveden

Číslo periodika v rámci svazku

1

Stát vydavatele periodika

NL - Nizozemsko

Počet stran výsledku

11

Strana od-do

1-11

Kód UT WoS článku

000636803000009

EID výsledku v databázi Scopus

2-s2.0-85087980387