Resource title

Correlation Risk Premia for Multi-Asset Equity Options

Resource image

image for OpenScout resource :: Correlation Risk Premia for Multi-Asset Equity Options

Resource description

The lack of a liquid market for implied correlations requires traders to estimate correlation matrices for pricing multi-asset equity options from historical data. To quantify the precision of these correlation estimates, we devise a block bootstrap procedure. The resulting bootstrap distributions are mapped on price distributions of three standard types of multi-asset options. ?Minimal? bid-ask spreads that reflect the risk from estimating the unknown correlations are quoted as quantiles of the price distributions. We discuss the influence of different market regimes and different payoff structures on the price distributions and on the the size of the resulting bid-ask spreads.

Resource author

Matthias R. Fengler, Peter Schwendner

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22225

Resource license

Adapt according to the presented license agreement and reference the original author.