Non-normality in Asset Pricing- Extensions and Applications of the Skew-normal Distribution
Author : Karl Shutes
Publisher :
Page : pages
File Size : 28,60 MB
Release : 2004
Category :
ISBN :
Fat-Tailed and Skewed Asset Return Distributions
Author : Svetlozar T. Rachev
Publisher : John Wiley & Sons
Page : 385 pages
File Size : 28,13 MB
Release : 2005-09-15
Category : Business & Economics
ISBN : 0471758906
Book Description
While mainstream financial theories and applications assume that asset returns are normally distributed, overwhelming empirical evidence shows otherwise. Yet many professionals don’t appreciate the highly statistical models that take this empirical evidence into consideration. Fat-Tailed and Skewed Asset Return Distributions examines this dilemma and offers readers a less technical look at how portfolio selection, risk management, and option pricing modeling should and can be undertaken when the assumption of a non-normal distribution for asset returns is violated. Topics covered in this comprehensive book include an extensive discussion of probability distributions, estimating probability distributions, portfolio selection, alternative risk measures, and much more. Fat-Tailed and Skewed Asset Return Distributions provides a bridge between the highly technical theory of statistical distributional analysis, stochastic processes, and econometrics of financial returns and real-world risk management and investments.
Skew-Elliptical Distributions and Their Applications
Author : Marc G. Genton
Publisher : CRC Press
Page : 420 pages
File Size : 35,51 MB
Release : 2004-07-27
Category : Mathematics
ISBN : 0203492005
Book Description
This book reviews the state-of-the-art advances in skew-elliptical distributions and provides many new developments in a single volume, collecting theoretical results and applications previously scattered throughout the literature. The main goal of this research area is to develop flexible parametric classes of distributions beyond the classical no
A Simple Skewed Distribution with Asset Pricing Applications
Author : Frans de Roon
Publisher :
Page : 53 pages
File Size : 44,68 MB
Release : 2016
Category :
ISBN :
Book Description
Recent research has identified skewness and downside risk as one of the most important features of risk. We present a new distribution which makes modeling skewed risks no more difficult than normally distributed (symmetric) risks. Our distribution is a combination of the "downside" and "upside" half of two normal distributions, and its parameters can be calculated in closed-form to match a given mean, variance, and skewness. Value-at-risk, expected shortfall, portfolio weights, and risk premia have simple expressions for our distribution and show economically meaningful deviations from the normal case already for very modest levels of skewness. An empirical application suggests that our distribution fits the data well.
Mathematical and Statistical Methods for Actuarial Sciences and Finance
Author : Marco Corazza
Publisher : Springer
Page : 312 pages
File Size : 31,61 MB
Release : 2014-08-06
Category : Mathematics
ISBN : 331902499X
Book Description
The interaction between mathematicians and statisticians has been shown to be an effective approach for dealing with actuarial, insurance and financial problems, both from an academic perspective and from an operative one. The collection of original papers presented in this volume pursues precisely this purpose. It covers a wide variety of subjects in actuarial, insurance and finance fields, all treated in the light of the successful cooperation between the above two quantitative approaches. The papers published in this volume present theoretical and methodological contributions and their applications to real contexts. With respect to the theoretical and methodological contributions, some of the considered areas of investigation are: actuarial models; alternative testing approaches; behavioral finance; clustering techniques; coherent and non-coherent risk measures; credit scoring approaches; data envelopment analysis; dynamic stochastic programming; financial contagion models; financial ratios; intelligent financial trading systems; mixture normality approaches; Monte Carlo-based methods; multicriteria methods; nonlinear parameter estimation techniques; nonlinear threshold models; particle swarm optimization; performance measures; portfolio optimization; pricing methods for structured and non-structured derivatives; risk management; skewed distribution analysis; solvency analysis; stochastic actuarial valuation methods; variable selection models; time series analysis tools. As regards the applications, they are related to real problems associated, among the others, to: banks; collateralized fund obligations; credit portfolios; defined benefit pension plans; double-indexed pension annuities; efficient-market hypothesis; exchange markets; financial time series; firms; hedge funds; non-life insurance companies; returns distributions; socially responsible mutual funds; unit-linked contracts. This book is aimed at academics, Ph.D. students, practitioners, professionals and researchers. But it will also be of interest to readers with some quantitative background knowledge.
Financial Modeling Under Non-Gaussian Distributions
Author : Eric Jondeau
Publisher : Springer Science & Business Media
Page : 541 pages
File Size : 23,90 MB
Release : 2007-04-05
Category : Mathematics
ISBN : 1846286964
Book Description
This book examines non-Gaussian distributions. It addresses the causes and consequences of non-normality and time dependency in both asset returns and option prices. The book is written for non-mathematicians who want to model financial market prices so the emphasis throughout is on practice. There are abundant empirical illustrations of the models and techniques described, many of which could be equally applied to other financial time series.
Advances in the use of stochastic dominance in asset pricing
Author : Philippe Johannes Petrus Marie Versijp
Publisher : Rozenberg Publishers
Page : 128 pages
File Size : 43,14 MB
Release : 2007
Category :
ISBN : 9051709358
Book Description
The Heston Model and Its Extensions in VBA
Author : Fabrice D. Rouah
Publisher : John Wiley & Sons
Page : 359 pages
File Size : 32,64 MB
Release : 2015-04-27
Category : Business & Economics
ISBN : 111900330X
Book Description
Practical options pricing for better-informed investment decisions. The Heston Model and Its Extensions in VBA is the definitive guide to options pricing using two of the derivatives industry's most powerful modeling tools—the Heston model, and VBA. Light on theory, this extremely useful reference focuses on implementation, and can help investors more efficiently—and accurately—exploit market information to better inform investment decisions. Coverage includes a description of the Heston model, with specific emphasis on equity options pricing and variance modeling, The book focuses not only on the original Heston model, but also on the many enhancements and refinements that have been applied to the model, including methods that use the Fourier transform, numerical integration schemes, simulation, methods for pricing American options, and much more. The companion website offers pricing code in VBA that resides in an extensive set of Excel spreadsheets. The Heston model is the derivatives industry's most popular stochastic volatility model for pricing equity derivatives. This book provides complete guidance toward the successful implementation of this valuable model using the industry's ubiquitous financial modeling software, giving users the understanding—and VBA code—they need to produce option prices that are more accurate, and volatility surfaces that more closely reflect market conditions. Derivatives pricing is often the hinge on which profit is made or lost in financial institutions, making accuracy of utmost importance. This book will help risk managers, traders, portfolio managers, quants, academics and other professionals better understand the Heston model and its extensions, in a writing style that is clear, concise, transparent and easy to understand. For better pricing accuracy, The Heston Model and Its Extensions in VBA is a crucial resource for producing more accurate model outputs such as prices, hedge ratios, volatilities, and graphs.
Distortion Risk Measures and Multivariate Distributions Based on Skew Normal Settings
Author : Weizhong Tian (Ph. D.)
Publisher :
Page : 210 pages
File Size : 42,78 MB
Release : 2016
Category : Capital assets pricing model
ISBN :
Book Description
This thesis is divided into two parts: (I) Distortion Risk Measures Based on Skew Normal Settings. The coherent of the new skew normal distortion risk measure and its transform satisfies the classic Capital Asset Pricing Model (CAPM) were obtained, also, some of the properties of the transform for stock price model under logskewnormal are studied, a simulation based on the skew normal transform is given for an insurance payoff function. In addition, properties of flexible skew-generalized t-distributions with normal kernel and cauchy kernal with their corresponding risk measures are studied. Extended versions of Wang transform using two different forms of flexible skew-generalized distribution functions and two different forms of flexible skew-generalized t-distributions were proposed, moreover, the main results that flexible skew-generalized risk measures are both coherent and degree-two tail-preserving for usual bi-atomic risk distributions are obtained. (II) Families of Multivariate Skew Normal Distributions. The class of multivariate extended skew normal distributions is introduced. The properties of this class of distributions, such as, the moment generating function (MGF), probablitity density function, and independence are discussed. Based on this class of distributions, the extended noncentral skew chi-square distribution is defined and its properties are investigated. Also the necessary and sufficient conditions, under which a quadratic form of the model has an extended noncentral skew chi-square distribution, are obtained. For illustration of our main results, several examples are given. The class of multivariate skew slash distributions under different types of setting is introduced and its density function is discussed. A procedure to obtain the Maximum Likelihood estimators for this family is studied. In addition, the Maximum Likelihood estimators for the mixture model based on this family are discussed. For illustration of our main results, an application is studied to show the performance of the proposed algorithm.
The Heston Model and its Extensions in Matlab and C#
Author : Fabrice D. Rouah
Publisher : John Wiley & Sons
Page : 437 pages
File Size : 43,23 MB
Release : 2013-08-01
Category : Business & Economics
ISBN : 1118695178
Book Description
Tap into the power of the most popular stochastic volatility model for pricing equity derivatives Since its introduction in 1993, the Heston model has become a popular model for pricing equity derivatives, and the most popular stochastic volatility model in financial engineering. This vital resource provides a thorough derivation of the original model, and includes the most important extensions and refinements that have allowed the model to produce option prices that are more accurate and volatility surfaces that better reflect market conditions. The book's material is drawn from research papers and many of the models covered and the computer codes are unavailable from other sources. The book is light on theory and instead highlights the implementation of the models. All of the models found here have been coded in Matlab and C#. This reliable resource offers an understanding of how the original model was derived from Ricatti equations, and shows how to implement implied and local volatility, Fourier methods applied to the model, numerical integration schemes, parameter estimation, simulation schemes, American options, the Heston model with time-dependent parameters, finite difference methods for the Heston PDE, the Greeks, and the double Heston model. A groundbreaking book dedicated to the exploration of the Heston model—a popular model for pricing equity derivatives Includes a companion website, which explores the Heston model and its extensions all coded in Matlab and C# Written by Fabrice Douglas Rouah a quantitative analyst who specializes in financial modeling for derivatives for pricing and risk management Engaging and informative, this is the first book to deal exclusively with the Heston Model and includes code in Matlab and C# for pricing under the model, as well as code for parameter estimation, simulation, finite difference methods, American options, and more.
