1 / 2

A potentially interesting paper Summary:

Discussion for Chen and Gau (2004) : Pricing Currency Options under Stochastic Volatility by Yaw-huei Wang. A potentially interesting paper Summary: Motivation: A lognormal density fails to fit market prices.

peri
Télécharger la présentation

A potentially interesting paper Summary:

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Discussion for Chen and Gau (2004) : Pricing Currency Options under Stochastic Volatilityby Yaw-huei Wang • A potentially interesting paper • Summary: • Motivation: A lognormal density fails to fit market prices. • Objective: Comparing the performance of a constant and a stochastic volatility model for FX option pricing. • Models: Garman & Kohlhagen v.s. Heston • Findings: • (1) Heston’s model outperforms • (2) Speed of volatility mean reverting for FX is faster • (3) FX exhibits less negatively skewed.

  2. Contribution: comparing pricing performance and economic meanings implied in estimated parameters. • Questions & Comments: • Reader-friendly presentation in the article. • Sophisticated data processing. • Synchronization, Transformation from American to European, Abandon short-time-to-maturity data … etc. • Comparison of models’ performance is interesting. But, comparison of economic meanings implied in a good model could be more interesting, particularly for different assets. • Does jumps matter? Jumps in returns or volatility, or both? • Empirical implementations of a jump stochastic volatility model for pricing FX options could be interesting?

More Related