Based on recent financial crises, it is desirable to develop a volatility model appropriate for dynamic markets experiencing sharp crashes. We observe that elasticity of variance of stock or index is randomly fluctuating around a mean level and the mean level itself is time varying contrary to the conventional assumption of constant elasticity of variance. This paper shows how useful the concept called stochastic elasticity of variance is to characterize the global financial crisis. Also, the valuation result for a financial derivative is presented in terms of implied volatility.
|Title of host publication||Proceedings of the World Congress on Engineering 2019, WCE 2019|
|Editors||S. I. Ao, Len Gelman, David WL Hukins, Andrew Hunter, A. M. Korsunsky|
|Number of pages||6|
|Publication status||Published - 2019|
|Event||2019 World Congress on Engineering, WCE 2019 - London, United Kingdom|
Duration: 2019 Jul 3 → 2019 Jul 5
|Name||Lecture Notes in Engineering and Computer Science|
|Conference||2019 World Congress on Engineering, WCE 2019|
|Period||19/7/3 → 19/7/5|
Bibliographical noteFunding Information:
Manuscript received February 28, 2019; revised April 14, 2019. This work was supported in part by the National Research Foundation of Korea under Grant NRF-2017R1A2B4003226.
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All Science Journal Classification (ASJC) codes
- Computer Science (miscellaneous)