Arbitrage-free call option surface construction using regression splines

Arbitrage-free call option surface construction using regression splines

In this work, we suggest a novel quadratic programming‐based algorithm to generate an arbitrage‐free call option surface. The empirical performance of the proposed method is evaluated using S&P 500 Index call options. Our results indicate that the proposed method provides a more precise fit to o...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:Applied stochastic models in business and industry 2015-07, Vol.31 (4), p.515-527
1. Verfasser: Orosi, Greg
Format: Artikel
Sprache:eng
Schlagworte:
Algorithms
arbitrage-free
Business
Construction
Construction industry
implied volatility
index option pricing
interpolation
nonparametric
Performance indices
Regression
Splines
Stochasticity
volatility smile
volatility surface
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
Beschreibung
Zusammenfassung:In this work, we suggest a novel quadratic programming‐based algorithm to generate an arbitrage‐free call option surface. The empirical performance of the proposed method is evaluated using S&P 500 Index call options. Our results indicate that the proposed method provides a more precise fit to observed option prices than other alternative methodologies. Copyright © 2014 John Wiley & Sons, Ltd.
ISSN:1524-1904
1526-4025
DOI:10.1002/asmb.2045