|Title:||On the errors and comparison of vega estimation methods||Authors:||Chung S.-L.
|Issue Date:||2005||Journal Volume:||25||Journal Issue:||1||Start page/Pages:||21-38||Source:||Journal of Futures Markets||Abstract:||
This article discusses convergence problems when calculating Vega (option sensitivity to volatility) that arise from discretization errors embedded in the lattice approach. Four alternative improvements to the traditional binomial method are discussed and investigated for performance. We also propose a new Modified Binomial (MB) Method to calculate Vegas. Numerical results show that although the MB is not the most price accurate of the models, due to its error structure as a function of volatility, it produces the most accurate and fastest Vega estimates. ? 2005 Wiley Periodicals, Inc.
|Appears in Collections:||財務金融學系|
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