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                                                     Seminar

             Department of Systems Engineering and Engineering Management
                                  The Chinese University of Hong Kong

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Title

:

Calibration of Stock Betas from Skews of Implied Volatilities

　

　

　

Speaker

:

Prof. Jean-Pierre Fouque

　

　

Professor, Statistics & Applied Probability Director,

　

　

Center for Research in Financial Mathematics and Statistics University of California Santa Barbara

　

　

　

Date

:

March 19th, 2009 (Thursday)

　

　

　

Time

:

4:30 p.m. - 5:30 p.m.

　

　

　

Venue

:

Room 513

　

　

William M.W. Mong Engineering Building

　

　

(Engineering Building Complex Phase 2)

　

　

CUHK

　

　

　

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Abstract:
　

We develop call option price approximations for both the market index and an individual asset using a singular perturbation of a continuous time Capital Asset Pricing Model (CAPM) in a stochastic volatility environment. These approximations show the role played by the asset\'s beta parameter as a component of the parameters of the call option
price of the asset. They also show how these parameters, in combination with the parameters of the call option price for the market, can be used to extract the beta parameter. Finally, a calibration technique for the beta parameter is derived using the
estimated option price parameters of both the asset and market index. The resulting estimator of the beta parameter is not only simple to implement but has the advantage of being forward-looking as it is calibrated from skews of implied volatilities.

Joint work with Eli Kollman (UCSB)


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Biography:
　

Prof. Jean-Pierre Fouque got his Ph.D. in Mathematics at University Pierre et Marie Curie, Paris 6, 1979. He held positions at the French National Center for Scientific Research (CNRS) and at the Ecole Polytechique, before joining the North Carolina State University in 1998 where he started the Masters of Financial Mathematics. Since 2006, he is Professor in the department of Statistics and Applied Probability at the
University of California Santa Barbara. He is also the Director of the Center for Research in Financial Mathematics and Statistics (CRFMS) opened in 2006. His research is in the domain of random media with applications ranging from wave propagation phenomena to
financial mathematics. He published over seventy research articles and co-authored two books; \"Derivatives in Financial Markets with Stochastic Volatility\" (Cambridge University Press, 2000), and \"Wave Propagation and Time Reversal in Randomly Layered Media\" (Springer, 2007).

His web page:
www.pstat.ucsb.edu/faculty/fouque


************************* ALL ARE WELCOME ************************

　

　

　

Host

:

Prof. Chen Nan

Tel

:

(852) 2609-8237

Email

:

nchen@se.cuhk.edu.hk

　

　

　

Enquiries

:

Prof. Nan Chen or Prof. Sean X. Zhou

　

:

Department of Systems Engineering and Engineering Management

　

　

CUHK

Website

:

http://www.se.cuhk.edu.hk/~seg5810

Email

:

seg5810@se.cuhk.edu.hk

　

　

　

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