To install click the Add extension button. That's it.

The source code for the WIKI 2 extension is being checked by specialists of the Mozilla Foundation, Google, and Apple. You could also do it yourself at any point in time.

4,5
Kelly Slayton
Congratulations on this excellent venture… what a great idea!
Alexander Grigorievskiy
I use WIKI 2 every day and almost forgot how the original Wikipedia looks like.
Live Statistics
English Articles
Improved in 24 Hours
Added in 24 Hours
Languages
Recent
Show all languages
What we do. Every page goes through several hundred of perfecting techniques; in live mode. Quite the same Wikipedia. Just better.
.
Leo
Newton
Brights
Milds

Constant elasticity of variance model

From Wikipedia, the free encyclopedia

In mathematical finance, the CEV or constant elasticity of variance model is a stochastic volatility model, which attempts to capture stochastic volatility and the leverage effect. The model is widely used by practitioners in the financial industry, especially for modelling equities and commodities. It was developed by John Cox in 1975[1]

Dynamic

The CEV model describes a process which evolves according to the following stochastic differential equation:

in which S is the spot price, t is time, and μ is a parameter characterising the drift, σ and γ are other parameters, and W is a Brownian motion [2]. The notation "dX" represents a differential, i.e. an infinitesimally small change in parameter X.

The constant parameters satisfy the conditions .

The parameter controls the relationship between volatility and price, and is the central feature of the model. When we see the so-called leverage effect, commonly observed in equity markets, where the volatility of a stock increases as its price falls. Conversely, in commodity markets, we often observe , the so-called inverse leverage effect,[3][4] whereby the volatility of the price of a commodity tends to increase as its price increases.

See also

References

  1. ^ Cox, J. "Notes on Option Pricing I: Constant Elasticity of Diffusions." Unpublished draft, Stanford University, 1975.
  2. ^ Vadim Linetsky & Rafael Mendozaz, 'The Constant Elasticity of Variance Model', 13 July 2009. (Accessed 2018-02-20.)
  3. ^ Emanuel, D.C., and J.D. MacBeth, 1982. "Further Results of the Constant Elasticity of Variance Call Option Pricing Model." Journal of Financial and Quantitative Analysis, 4 : 533–553
  4. ^ Geman, H, and Shih, YF. 2009. "Modeling Commodity Prices under the CEV Model." The Journal of Alternative Investments 11 (3): 65–84. doi:10.3905/JAI.2009.11.3.065

External links


This page was last edited on 6 November 2019, at 14:38
Basis of this page is in Wikipedia. Text is available under the CC BY-SA 3.0 Unported License. Non-text media are available under their specified licenses. Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc. WIKI 2 is an independent company and has no affiliation with Wikimedia Foundation.