Stochastic Elasticity of Variance, the Global Financial Crisis and Implied Volatility

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

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.

Original languageEnglish
Title of host publicationProceedings of the World Congress on Engineering 2019, WCE 2019
EditorsS. I. Ao, Len Gelman, David WL Hukins, Andrew Hunter, A. M. Korsunsky
PublisherNewswood Limited
Pages228-233
Number of pages6
ISBN (Electronic)9789881404862
Publication statusPublished - 2019
Event2019 World Congress on Engineering, WCE 2019 - London, United Kingdom
Duration: 2019 Jul 32019 Jul 5

Publication series

NameLecture Notes in Engineering and Computer Science
Volume2240
ISSN (Print)2078-0958
ISSN (Electronic)2078-0966

Conference

Conference2019 World Congress on Engineering, WCE 2019
Country/TerritoryUnited Kingdom
CityLondon
Period19/7/319/7/5

Bibliographical note

Publisher Copyright:
© 2019 Newswood Limited. All rights reserved.

All Science Journal Classification (ASJC) codes

  • Computer Science (miscellaneous)

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