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2003-12-08Berichte und sonstige Texte DOI: 10.18452/9130
Implied Volatility String Dynamics
dc.contributor.authorFengler, Matthias R.
dc.contributor.authorHärdle, Wolfgang Karl
dc.contributor.authorMammen, Enno
dc.date.accessioned2017-06-17T00:07:18Z
dc.date.available2017-06-17T00:07:18Z
dc.date.created2005-12-02
dc.date.issued2003-12-08
dc.date.submitted2003-12-08
dc.identifier.urihttp://edoc.hu-berlin.de/18452/9782
dc.description.abstractA primary goal in modelling the dynamics of implied volatility surfaces (IVS) aims at reducing complexity. For this purpose one fits the IVS each day and applies a principal component analysis using a functional norm. This approach, however, neglects the degenerated string structure of the implied volatility data and may result in a severe modelling bias. We propose a dynamic semiparametric factor model, which approximates the IVS in a finite dimensional function space. The key feature is that we only fit in the local neighborhood of the design points. Our approach is a combination of methods from functional principal component analysis and backfitting techniques for additive models. The model is found to have an approximate 10% better performance than the typical naïve trader models. The model can be a backbone in risk management serving for value at risk computations and scenario analysis.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/
dc.subjectGeneralized Additive Modelseng
dc.subjectBackfittingeng
dc.subjectFunctional Principal Component Analysiseng
dc.subjectImplied Volatility Surface Smileeng
dc.subject.ddc330 Wirtschaft
dc.titleImplied Volatility String Dynamics
dc.typereport
dc.identifier.urnurn:nbn:de:kobv:11-10054393
dc.identifier.urnurn:nbn:de:kobv:11-10050885
dc.identifier.doihttp://dx.doi.org/10.18452/9130
local.edoc.container-titleSonderforschungsbereich 373: Quantification and Simulation of Economic Processes
local.edoc.fp-subtypepaper.disc
local.edoc.type-nameBerichte und sonstige Texte
local.edoc.institutionWirtschaftswissenschaftliche Fakultät
local.edoc.container-publisher-nameHumboldt-Universität zu Berlin
local.edoc.container-publisher-placeBerlin
local.edoc.container-eventconference
local.edoc.container-eventconference
local.edoc.container-volume2003
local.edoc.container-issue54
local.edoc.container-issue54
local.edoc.container-year2003
dc.description.versionNot Reviewed

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