The IVF model does not necessarily get the evolution of the volatility surface correct. Explain this statement.

Question:

"The IVF model does not necessarily get the evolution of the volatility surface correct." Explain this statement.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Options Futures and Other Derivatives

ISBN: 978-0134472089

10th edition

Authors: John C. Hull

See More Books

Question Posted: Feb 12, 2018 12:27 PM

See More Questions

As discussed in the text, in the absence of market imperfections and tax effects, we would expect the share price to decline by the amount of the dividend payment when the stock goes ex dividend....
Why does a DSS need a DBMS, a model management system, and a user interface, but not necessarily a knowledge-based management system?
The Software Industry: When personal computers first came onto the scene, the task of writing software was considerably more difficult than it is today. Over the following decades, consumer demand...
2. National Defense (40 points). There are 11 countries in Europe who get utility from general consumption c, and from European national defense G. The utility of a generic country i is u(ci, G) =...
A Thermodynamic Process in a Liquid A chemical engineer is studying the properties of liquid methanol (CH3OH). She uses a steel cylinder with a cross-sectional area of 0.0200 m2 and containing 1.20 X...
The balance in the supplies account, before adjustment at the end of the year, is $1,736. Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $813.
Precision Balls Ltd produces and sells high-quality lawn bowls sets. Each set of balls is contained in a wooden carrying case, which is purchased from an outside supplier. The wooden cases are held...
Drabinski Ltd. decided on 1 July 20X3 to dispose of an asset group consisting of land, a building, and equipment. An active plan of disposal is being carried out, and sale is highly probable within...
A currenty situation I'm in is buying new furniture and appliances for my new home, its a constant struggle balancing what I want and how much it costs. A linear way of making this decision is by...
The Pedal Pusher Bicycle Shop operates 7 days per week, closing only on Christmas Day. The shop pays $300 for a particular bicycle purchased from the manufacturer. The annual holding cost per bicycle...
Write down the equations for simulating the path followed by the asset price in the stochastic volatility model in equation (27.2) and (27.3).
"The IVF model correctly values any derivative whose payoff depends on the value of the underlying asset at only one time." Explain why.
1. Was Mercury guilty of deceptive advertising with its Mariner commercial? 2. Check the truth in advertising guidelines at the FTC Web site (www.ftc.gov/bcp/edu/pubs/business/adv/bus35.shtm). Has...
Does work done on a system necessarily change the system's kinetic energy?
When you stand up from a seated position, you push down with your legs. Does this mean you do negative work when you stand up?
DATATRONIC is a company started by George Pandry and Rolin Martin, two friends who had just graduated with degrees in business administration and saw an opportunity to start their own business. With...
A mosquito splatters onto the windshield of a moving bus and sticks to the glass. (a) During the collision, is the magnitude of the change in the mosquito's momentum smaller than, larger than, or...
A tennis ball of inertia $0.20 \mathrm{~kg}$ is launched straight up in the air by hitting it with a racquet. If the magnitude of the acceleration of the ball while it is in contact with the...
A traffic safety research team conducted a survey over two years on the use of motorcycle helmets. In the survey, each year 1000 motorcyclists were asked whether they use helmets that are compliant...
1. What are some current issues facing Saudi Arabia? What is the climate for doing business in Saudi Arabia today? 2. Is it legal for Auger's firm to make a payment of $100,000 to help ensure this...
Suppose you own 5,000 shares that are worth $25 each. How can put options be used to provide you with insurance against a decline in the value of your holding over the next four months?
Explain how margin protect investors against the possibility of default.
Explain how margin protect investors against the possibility of default.
Reyes Manufacturing Company uses a job order cost system. At the beginning of January, the company had one job in process (Job 201) and one job completed but not yet sold (Job 200). Job 202 was...
n-1 3.) Given the discrete sequence x(n) = (3) u(n - 1) where u is the unit step sequence, do the following: (SHOW ALL WORK) a.) Compute the discrete time Fourier Transform (DTFT) X(w) of x(n). b.)...
The Cubby Bear started the month with a food inventory of $6,000 in the storeroom. During the month, food purchases totaling $8,000 were delivered to the storeroom and food totaling $8,000 was issued...

The IVF model does not necessarily get the evolution of the volatility surface correct. Explain this statement.

Question:

Step by Step Answer:

The IVF model is designed to match the vo...View the full answer

Options Futures and Other Derivatives

Students also viewed these Corporate Finance questions