Resource title

DSFM fitting of implied volatility surfaces

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Resource description

The implied volatility became one of the key issues in modern quantitative finance, since the plain vanilla option prices contain vital information for pricing and hedging of exotic and illiquid options. European plain vanilla options are nowadays widely traded, which results in a great amount of high-dimensional data especially on an intra day level. The data reveal a degenerated string structure. Dynamic Semiparametric Factor Models (DSFM) are tailored to handle complex, degenerated data and yield low dimensional representation of the implied volatility surface (IVS). We discuss estimation issues of the model and apply it to DAX option prices.

Resource author

Szymon Borak, Matthias R. Fengler, Wolfgang Karl Härdle

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25041

Resource license

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