Calibration of the Hobson&Rogers model: empirical tests

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Calibration of the Hobson&Rogers model: empirical tests

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Andrea Pascucci (Università di Bologna, Italy)
Paolo Foschi (Università di Bologna, Italy)

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Abstract

The path-dependent volatility model by Hobson and Rogers is considered. It is known that this model can potentially reproduce the observed smile and skew patterns of different directions, while preserving the completeness of the market. In order to quantitatively investigate the pricing performance of the model a calibration procedure is here derived. Numerical results based on S&P500 option prices give evidence of the effectiveness of the model.

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Paper provided by EconWPA in its series Finance with number 0509020.

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Length: 26 pages
Date of creation: 16 Sep 2005
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Handle: RePEc:wpa:wuwpfi:0509020

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G - Financial Economics

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-09-29 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Mark Broadie & Mikhail Chernov & Michael Johannes, 2007. "Model Specification and Risk Premia: Evidence from Futures Options," Journal of Finance, American Finance Association, vol. 62(3), pages 1453-1490, 06. [Downloadable!] (restricted)
René Garcia & Eric Ghysels & Éric Renault, 2004. "The Econometrics of Option Pricing," CIRANO Working Papers 2004s-04, CIRANO. [Downloadable!]
Andrea Pascucci & Marco Di Francesco, 2005. "On the complete model with stochastic volatility by Hobson and Rogers," Finance 0503013, EconWPA. [Downloadable!]
Carl Chiarella & Oh-Kang Kwon, 2000. "A Complete Stochastic Volatility Model in the HJM Framework," Research Paper Series 43, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Paolo Foschi & Andrea Pascucci, 2008. "Path dependent volatility," Decisions in Economics and Finance, Springer, vol. 31(1), pages 13-32, May. [Downloadable!] (restricted)
Other versions:
- Pascucci, Andrea & Foschi, Paolo, 2006. "Path dependent volatility," MPRA Paper 973, University Library of Munich, Germany. [Downloadable!]

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This page was last updated on 2009-11-17.

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