Estimation and Calibration of a Dynamic Variance Gamma Model Using Vix Data
16 Pages Posted: 22 Oct 2010
Date Written: September 18, 2010
Abstract
The aim of this paper is to investigate the ability of the Dynamic Variance Gamma model, recently proposed by Bellini and Mercuri (2010), to evaluate option prices on the S&P500 index. We also provide a simple relation between the Dynamic Variance Gamma model and the Vix index. We use this result to build a maximum likelihood estimation procedure and to calibrate the model on option data.
Keywords: Variance-Gamma Distribution, Stochastic Volatility Model, Vix Index, Maximum Likelihood Estimation, Calibration
JEL Classification: C00, C63, C65, G12, G13
Suggested Citation: Suggested Citation
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