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How do you handle implied volatility performing a VaR Monte-Carlo simulation using a stochastic volatility process calibrated on the underlying
Say you have a portfolio consisting of options each having a market implied volatility. If you now use some stochastic volatility model like GARCH to calibrate the real world volatility of the ...
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8
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Stock Price Behavior and GARCH
In my (limited) understanding, the behavior of a stock price can be modeled using Geometric Brownian Motion (GBM). According to the Hull book I'm currently reading, the discrete-time version of this ...
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