SVI estimation of the implied volatility by Kalman filter.

Description

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.

Links & Downloads

1. http://urn.kb.se/resolve?urn=urn:nbn:se:hh:diva-13949

Tags

Kalman filter

SVI model

implied volatility

Mathematical statistics

Matematisk statistik

Applied mathematics

Tillämpad matematik

Additional Fields

Identifer	oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:hh-13949
Date	January 2010
Creators	Burnos, Sergey, Ngow, ChaSing
Publisher	Högskolan i Halmstad, Sektionen för Informationsvetenskap, Data– och Elektroteknik (IDE), Högskolan i Halmstad, Tillämpad matematik och fysik (MPE-lab), Högskolan i Halmstad, Sektionen för Informationsvetenskap, Data– och Elektroteknik (IDE), Högskolan i Halmstad, Tillämpad matematik och fysik (MPE-lab)
Source Sets	DiVA Archive at Upsalla University
Language	English
Detected Language	English
Type	Student thesis, info:eu-repo/semantics/bachelorThesis, text
Format	application/pdf
Rights	info:eu-repo/semantics/openAccess