Stochastic volatility and option pricing in the Brazilian stock marketan empirical investigation

Resumo

The stochastic volatility model (SVPS) proposed by Fouque et al. (2000a) explores a rapid timescale fluctuation of the volatility process to end up with a parsimonious way of capturing the volatility smile implied by close to the money options. In this article we test the SVFPS model using options from a Brazilian telecommunications stock. First, we find evidence of fast mean reversion in the volatility process. In addition, to test the model's ability to price options not so close to the money, we extend its statistical estimators to consider, in the calibration process, a wider region for the options moneyness. As an illustration, we price an exotic option. © 2005, Sage Publications India Pvt. Ltd. All rights reserved.

Ficha do documento

Tipo

Artigo científico

Ano

2005

Instituição

Fundação Getulio Vargas

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso restrito

DOI

10.1177/097265270500400204

Identificador

oai:repositorio.fgv.br:10438/25497

Temas

Economia

Palavras-chave

Mean reversionMean reversion speedOption pricesStochastic volatilityVolatility smileFinançasVolatilidade (Finanças)Liquidez (Economia)Preços