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Springer Finance Lecture Notes

Uncertain Volatility Models

Theory and Application

Authors: Buff, Robert

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About this book

This book introduces Uncertain Volatility Models in mathematical finance. Uncertain Volatility Models evaluate option portfolios under worst- and best-case scenarios when the volatility coefficient of the pricing model cannot be determined exactly. The user defines subjective volatility constraints; within those constraints, extremal prices are computed. This book studies two types of constraints: volatility bands with upper and lower bounds, and shock scenarios with short periods of extreme volatility, but unknown timing. Uncertain Volatility Models are nonlinear. Worst- and best-case scenarios applied to isolated option positions do not always lead to the same extremal volatility. When applied to an options portfolio, a diversification effect reduces the overall exposure to volatility fluctuations within the subjective constraints. This book explores algorithmic issues that arise due to nonlinearity. Because Uncertain Volatility Models must be applied to option portfolios as a whole, they are difficult to implement on a computer if the portfolio contains barrier or American options. This book is for graduate students, researchers and practitioners who wish to study advanced aspects of volatility risk in portfolios of vanilla and exotic options.

Reviews

From the reviews:

MATHEMATICAL REVIEWS

"The book bridges theory and real-world problems in a clear and pragmatic fashion. It can be useful both for academics and professionals in the financial community."

"This book, which comes out of the author’s Ph.D. thesis, introduces uncertain volatility models. … The formal results are illustrated by many empirical examples. … The book bridges theory and real-world problems in a clear and pragmatic fashion. It can be useful both for academics and for professionals in the financial community." (Damir Filipovic, Mathematical Reviews, 2003 i)

"The book is devoted to the study of uncertain volatility models that evaluate option portfolios … . The author travels in this book the entire road from innovative mathematical finance to a working software system … . Practitioners and students who need to build analytic software libraries may benefit from reading this book … . This book is also for graduate students and researchers who wish to study advanced aspects of volatility risk in portfolios of vanilla and exotic options." (Anatoliy Swishchuk, Zentralblatt MATH, Vol. 1004 (4), 2003)


Table of contents (16 chapters)

Table of contents (16 chapters)

Buy this book

eBook $64.99
price for USA in USD (gross)
  • ISBN 978-3-642-56323-2
  • Digitally watermarked, DRM-free
  • Included format: PDF
  • ebooks can be used on all reading devices
  • Immediate eBook download after purchase
Softcover $84.99
price for USA in USD
  • ISBN 978-3-540-42657-8
  • with online files
  • Free shipping for individuals worldwide
  • Immediate ebook access, if available*, with your print order
  • Usually dispatched within 3 to 5 business days.
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Bibliographic Information

Bibliographic Information
Book Title
Uncertain Volatility Models
Book Subtitle
Theory and Application
Authors
Series Title
Springer Finance Lecture Notes
Copyright
2002
Publisher
Springer-Verlag Berlin Heidelberg
Copyright Holder
Springer-Verlag Berlin Heidelberg
eBook ISBN
978-3-642-56323-2
DOI
10.1007/978-3-642-56323-2
Softcover ISBN
978-3-540-42657-8
Series ISSN
2524-681X
Edition Number
1
Number of Pages
XII, 244
Topics

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