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SVI estimation of the implied volatility by Kalman filter.
Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE). Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE), Halmstad Embedded and Intelligent Systems Research (EIS), MPE-lab. (Finance Mathematics)
Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE). Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE), Halmstad Embedded and Intelligent Systems Research (EIS), MPE-lab. (Finance Mathematics)
2010 (English)Independent thesis Advanced level (degree of Master (One Year)), 15 credits / 22,5 HE creditsStudent thesis
Abstract [en]

To understand and model the dynamics of the implied volatility smile is essential for trading, pricing and risk management portfolio. We suggest a  linear Kalman filter for updating of the Stochastic Volatility Inspired (SVI) model of the volatility. From a risk management perspective we generate the 1-day ahead forecast of profit and loss (P\&L) of option portfolios. We compare the estimation of the implied volatility using the SVI model with the cubic polynomial model. We find that the SVI Kalman filter has outperformed the  others.

Place, publisher, year, edition, pages
2010. , 58 p.
Keyword [en]
Kalman filter, SVI model, implied volatility
National Category
Probability Theory and Statistics Computational Mathematics
Identifiers
URN: urn:nbn:se:hh:diva-13949OAI: oai:DiVA.org:hh-13949DiVA: diva2:373504
Presentation
2010-06-04, Haldasalen, Halmstad University, Halmstad, 12:30 (English)
Uppsok
Physics, Chemistry, Mathematics
Supervisors
Examiners
Available from: 2010-12-02 Created: 2010-11-30 Last updated: 2010-12-02Bibliographically approved

Open Access in DiVA

fulltext(995 kB)2775 downloads
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File name FULLTEXT01.pdfFile size 995 kBChecksum SHA-512
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Type fulltextMimetype application/pdf

By organisation
School of Information Science, Computer and Electrical Engineering (IDE)MPE-lab
Probability Theory and StatisticsComputational Mathematics

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf