Volatility surfacef and market price uncertainty

• Autor(a) principal: Lahouiri, Elia
• Data de Publicação: 2018
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/49536
• topic: risk management; volatility; surface; regulation; Price uncertainty

Volatility surface is a major factor in the valuation of several instruments. The models behind it are many. In this work project, we are going to discuss the major stochastic models used in practice, the hypotheses of these models, how to construct them and their main drawbacks. These drawbacks lead sometimes to valuation uncertainty in the market which is an important risk factor in different fields in finance. In this work we are going to focus on risk management. The aim of this analysis is to understand the motivation under which the European Bank Authority (EBA) creates a prudent valuation framework and the risk management solution to assess this risk.