Earticle

초록

영어

In this paper, we proposed model for European option pricing using predicted cumulative probability distribution of hidden Markov Model. The Black-Scholes model is based on Gaussian distribution and the model's main shortfall is fat-tail problem. Because of fat-tail problem, the implied volatility surface is shaped skew, smirk or other forms. To correct model's drawback, we extract predicted cumulative distribution using hidden Markov Model and simulate the underlying price paths using Monte Carlo method. In the results, our model re
ect current implied volatility surface suciently.

목차

Abstract
 1. Introduction
 2. Hidden Markov Model
  2.1. Hidden Markov Model
  2.2. Application of HMM
 3. Monte Carlo Valuation of a European option under HMM set-up
  3.1. Predicted Cumulative Probability Distribution
  3.2. Monte Carlo Valuation
 4. Empirical Analysis
  4.1. Data
  4.2. Training of the hidden Markov Model
  4.3. Simulation Results
 5. Conclusion
 References

키워드

저자

• Youngchul Han [ Department of Mathematics, Yonsei University, Seoul 120-749, Korea ]
• Jungwoo Lee [ Department of Mathematics, Yonsei University, Seoul 120-749, Korea ]
• Jeong-Hoon Kim [ Department of Mathematics, Yonsei University, Seoul 120-749, Korea ]

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간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

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• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330