English, Article edition: ON ESTIMATION OF VOLATILITY OF FINANCIAL TIME SERIES FOR PRICING DERIVATIVES Michal Černý

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Bookmark: http://trove.nla.gov.au/version/197075
Physical Description
  • article
Language
  • English

Edition details

Title
  • ON ESTIMATION OF VOLATILITY OF FINANCIAL TIME SERIES FOR PRICING DERIVATIVES
Author
  • Michal Černý
Physical Description
  • article
Notes
  • Estimation of volatility of financial time series plays a crucial role in pricing derivatives. Volatility is often estimated from historical data; however, it is well known that volatility varies in time. We propose a method to choose a suitable length of historical data to estimate contemporary volatility. The method is based on adaptation of a procedure used in statistical quality control - a hypothesis, that data contains a changepoint of volatility, is tested and if the test gives a positive answer, the changepoint is estimated. Then, a period of data where no changepoint is statistically significant is used to estimate contemporary volatility. The approach is illustrated on an analysis of CZK/​EUR exchange rates.
  • Derivative, Black-Scholes model, time series, volatility, changepoint
  • RePEc:prg:jnlaop:v:2008:y:2008:i:4:id:126:p:12-21
Language
  • English
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