XVII Workshop on Quantitative Finance -- Session on VOLATILITY (Sala Azzurra)
speaker: Gabriele Pompa (IMT Lucca)
speaker: Roberto Renò
timetable:
Thu 28 Jan, 17:30 - 19:00, Sala Azzurra
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communication: Smiling twice: The Heston++ model
speaker: Claudio Pacatispeaker: Gabriele Pompa (IMT Lucca)
speaker: Roberto Renò
abstract: We recommend the addition of a deterministic displacement to multifactor affine models to calibrate vanilla options on S&P500 and VIX derivatives jointly. The proposed model, labeled Heston++, calibrates both markets with an average relative error (on quoted implied volatilities over two years of data) of 2%, and a maximum relative error of 4%, without additional computational costs with respect to traditional affine benchmarks. Our empirical results also provide strong support for the presence of both pricevolatility negatively correlated cojumps and idiosyncratic jumps in the volatility dynamics.
timetable:
Thu 28 Jan, 17:30 - 19:00, Sala Azzurra
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