Tid: 28 januari 2002 kl 1515-1600

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!

Föredragshållare: Mathias Barkhagen. Bild

Titel: Value at Risk & Vega Risk - using the implied volatility surface to compute VaR for option positions. (Examensarbete)

Full text - postscript-format


Option positions are exposed to a range of market risks. Delta and gamma risks are the exposures of an option position to changes in the prices of the underlying assets. Vega risk is the exposure of an option position to changes in the implied volatility of the option. This risk can be a large part of the risk in a portfolio containing options. This emphasizes the need for a risk model, which correctly incorporates vega risk.

The treatment of vega risk is complicated by the prevalence of volatility smiles and term structures in option markets. The main objective of this thesis is to develop a method, which incorporates these aspects of vega risk into a Value at Risk model. In the model proportional changes in implied volatility and the underlying asset price are assumed to be jointly normally distributed.

The model is then implemented on option data from the Stockholm Exchange. A general backtesting method is developed in order to be able to verify the accuracy of the model and to identify its possible shortcomings.

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