Term Structure Estimation - An Implied Norm Approach: Negative Option Prices - A Puzzle or Just Noise?

2000 ◽  
Author(s):  
Ioulia D. Ioffe ◽  
Alexandra E. Mackay ◽  
Eliezer Z. Prisman
Keyword(s):  
Term Structure ◽  
Option Prices ◽  
Structure Estimation

CALIBRATION OF STOCHASTIC VOLATILITY MODELS VIA SECOND-ORDER APPROXIMATION: THE HESTON CASE

2015 ◽  
Vol 18 (06) ◽  
pp. 1550036 ◽  
Author(s):  
ELISA ALÒS ◽  
RAFAEL DE SANTIAGO ◽  
JOSEP VIVES
Keyword(s):  
Term Structure ◽  
Implied Volatility ◽  
Order Approximation ◽  
Calibration Procedure ◽  
Computational Effort ◽  
Heston Model ◽  
Option Prices ◽  
Volatility Models ◽  
Short And Long Term ◽  
Long Term Behavior

In this paper, we present a new, simple and efficient calibration procedure that uses both the short and long-term behavior of the Heston model in a coherent fashion. Using a suitable Hull and White-type formula, we develop a methodology to obtain an approximation to the implied volatility. Using this approximation, we calibrate the full set of parameters of the Heston model. One of the reasons that makes our calibration for short times to maturity so accurate is that we take into account the term structure for large times to maturity: We may thus say that calibration is not "memoryless," in the sense that the option's behavior far away from maturity does influence calibration when the option gets close to expiration. Our results provide a way to perform a quick calibration of a closed-form approximation to vanilla option prices, which may then be used to price exotic derivatives. The methodology is simple, accurate, fast and it requires a minimal computational effort.

VIX VERSUS VXX: A JOINT ANALYTICAL FRAMEWORK

2020 ◽  
Vol 23 (05) ◽  
pp. 2050033 ◽  
Author(s):  
MARTINO GRASSELLI ◽  
LAKSHITHE WAGALATH
Keyword(s):  
Term Structure ◽  
Real Data ◽  
Analytical Framework ◽  
Option Prices ◽  
Options Market ◽  
Vix Futures ◽  
Consistent Manner ◽  
Systematic Behavior ◽  
Exchange Traded Notes ◽  
Reference Index

We propose a framework for modeling in a consistent manner the VIX index and the VXX, an exchange-traded note written on the VIX. Our study enables to link the properties of VXX to those of the VIX in a tractable way. In particular, we quantify the systematic loss observed empirically for VXX when the VIX futures term-structure is in contango and we derive option prices, implied volatilities and skews of VXX from those of VIX in infinitesimal developments. We also perform a calibration on real data which highlights the flexibility of our model in fitting the futures and the vanilla options market of VIX and VXX. Our framework can be used to model other exchange-traded notes on the VIX as well as any market where exchange-traded notes have been introduced on a reference index, hence providing tools to better anticipate and quantify systematic behavior of an exchange-traded note with respect to the underlying index.

The Efficacy of Term Structure Estimation Techniques

1992 ◽  
Vol 1 (4) ◽  
pp. 52-63 ◽  
Author(s):  
Mark Buono ◽  
Russell B. Gregory-allen ◽  
Uzi Yaari
Keyword(s):  
Term Structure ◽  
Estimation Techniques ◽  
Structure Estimation

Term structure estimation from on-the-run Treasuries

2003 ◽  
Vol 27 (8) ◽  
pp. 1487-1509 ◽  
Author(s):  
James V. Jordan ◽  
Sattar A. Mansi
Keyword(s):  
Term Structure ◽  
Structure Estimation
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