3- https://doi.org/10.7737/msfe.2014.20.1.021
Implied Volatility Function Approximation with Korean ELWs (Equity-Linked Warrants) via Gaussian Processes
- May 30, 2014
- Management Science and Financial Engineering
- Gyu-Sik Han
Abstract
A lot of researches have been conducted to estimate the volatility smile effect shown in the option market. This paper proposes a method to approximate an implied volatility function, given noisy real market option data. To construct an implied volatility function, we use Gaussian Processes (GPs). Their output values are implied volatilities while moneyness values (the ratios of strike price to underlying asset price) and time to maturities are as their input values. To show the performances of our proposed method, we conduct experimental simulations with Korean Equity-Linked Warrant (ELW) market data as well as toy data.
- # Implied Volatility Function
- # Gaussian Processes
- # Market Option
- # Market Data
- # Input Values
- # Output Values
- # Ratios Of Price
- # Real Option
- # Noisy Data
- # Real Data
