Questions tagged [market-model]

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Zero Coupon Bond prices in One Factor Hull White model

I implemented the one factor Hull White model for educational purposes and I calibrated the model from a given (made up!) yield curve: The Zero Coupon Bond Prices from this yield curve are: Taking ...
3
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Modeling market sentiment and pricing options by volume, open interest

Are there any empirically-proven methods/formulas for weighting IV surfaces, pricing a discount/premium in an option, and/or adjusting any of the 1st- or 2nd-order Greeks for the magnitude (volume or ...
1
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Modelling Order Flow

I am trying to model the number of order that come at a distance d from the top of the book on either side, both bid and ask. I was wondering what is a good way to model orders which improve the ...
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48 views

Interpretation of Market Price of Volatility Risk

In option pricing with market model equipped with stochastic volatility, there are numerous times mentioning "market price of volatility risk" without even define or give any explanation regarding the ...
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78 views

What is the intuition to believe that a properly designed option can be dynamically hedged (just for the 1 stock case)?

I would always presume that the portfolio consists of 1 stock and 1 risk-free asset. And that the $r, \alpha,\sigma$ are all non-zero, but might be time-dependent. When I say "any" option, I am ...
0
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Deriving Single Index Model (Market Model)

is the return of the stock of observation is the return of the reference market is the regression coefficient between the observed stock and the reference market is the regression intercept between ...