• The Journal of Asian Finance, Economics and Business
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• v.8 no.2
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• pp.685-695
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• 2021

This study explores the impact of stochastic volatility in option pricing. To be more specific, we compare the option pricing performance between stochastic volatility option pricing model, namely, Heston option pricing model and standard Black-Scholes option pricing. Our finding, based on the market price of SET50 index option between May 2011 and September 2020, demonstrates stochastic volatility of underlying asset return for all level of moneyness. We find that both deep in the money and deep out of the money option exhibit higher volatility comparing with out of the money, at the money, and in the money option. Hence, our finding confirms the existence of volatility smile in Thai option markets. Further, based on calibration technique, the Heston option pricing model generates smaller pricing error for all level of moneyness and time to expiration than standard Black-Scholes option pricing model, though both Heston and Black-Scholes generate large pricing error for deep-in-the-money option and option that is far from expiration. Moreover, Heston option pricing model demonstrates a better pricing accuracy for call option than put option for all level and time to expiration. In sum, our finding supports the outperformance of the Heston option pricing model over standard Black-Scholes option pricing model.

• Bulletin of the Korean Mathematical Society
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• v.46 no.2
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• pp.209-227
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• 2009

We examine a unified approach of calculating the closed form solutions of option price under stochastic volatility models using stochastic calculus and the Fourier inversion formula. In particular, we review and derive the option pricing formulas under Heston and correlated Stein-Stein models using a systematic and comprehensive approach which were derived individually earlier. We compare the empirical performances of the two stochastic volatility models and the Black-Scholes model in pricing KOSPI 200 index options.

• The KIPS Transactions:PartA
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• v.8A no.3
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• pp.217-226
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• 2001

In this paper, for continuous media access operations performed by Clustered Continuous Media Storage Server (CCMSS) system, we present the analytical model based on the open queueing network, which considers simultaneously two critical delay factors, the disk I/O and the internal network, in the CCMSS system. And we derive by using the analytical model the stochastic model for the total service delay time in the system. Next, we propose the integrated stochastic admission control model for the CCMSS system, which estimate the maximum number of admittable service requests at the allowable service failure rate by using the derived stochastic model and apply the derived number of requests in the admission control operation. For the performance evaluation of the proposed model, we evaluated the deadline miss rates by means of the previous stochastic model considering only the disk I/O and the propose stochastic model considering the disk I/O and the internal network, and compared the values with the results obtained from the simulation under the real cluster-based distributed media server environment. The evaluation showed that the proposed admission control policy reflects more precisely the delay factors in the CCMSS system.

• Management Science and Financial Engineering
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• v.19 no.1
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• pp.37-41
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• 2013

This study presents an application of stochastic model for limit order book (LOB) dynamics to Korean Stock Index Futures (KOSPI 200 Futures). Since KOSPI 200 futures market is widely known as one of the most liquid markets in the world, direct application of an existing model is hardly possible. Therefore, we modified an existing model to successfully model and predict the dynamics of extremely liquid KOSPI 200 futures market.

• Journal of information and communication convergence engineering
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• v.19 no.3
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• pp.136-141
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• 2021

Research on wireless sensor networks has focused on the monitoring and characterization of large-scale physical environments and the tracking of various environmental or physical conditions, such as temperature, pressure, and wind speed. We propose a stochastic mobility model that can be applied to a MANET (Mobile Ad-hoc NETwork). environment, and apply this mobility model to a newly proposed clustering-based routing protocol. To verify its stability and durability, we compared the proposed stochastic mobility model with a random model in terms of energy efficiency. The FND (First Node Dead) was measured and compared to verify the performance of the newly designed protocol. In this paper, we describe the proposed mobility model, quantify the changes to the mobile environment, and detail the selection of cluster heads and clusters formed using a fuzzy inference system. After the clusters are configured, the collected data are sent to a base station. Studies on clustering-based routing protocols and stochastic mobility models for MANET applications have shown that these strategies improve the energy efficiency of a network.

• Journal of the Korean Institute of Telematics and Electronics
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• v.26 no.6
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• pp.89-96
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• 1989

An improved method on texture coding, which is a part of the region growing based image coding, is presented in this paper. An image is segmented into stochastic regions which can be described as a stochastic random field, and non-stochastic ones in order to efficiently represent texture. In the texture coding and reconstruction, an autoregressive model is used for the stochastic regions, while a two-dimensional polynomial approximation is used for the non-stochastic ones. This proposed method leads to a better subjective quality, relatively higher compression ratio and shorter processing time for coding and reconstructing than the conventional method which uses only two-dimensional polynomial approximation.

• East Asian mathematical journal
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• v.34 no.1
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• pp.1-16
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• 2018

We study an optimization problem for hyperbolic absolute risk aversion (HARA) utility function under two-factor Heston's stochastic volatility model. It is not possible to obtain an explicit solution because our financial market model is complicated. However, by using asymptotic analysis technique, we find the explicit forms of the approximations of the optimal value function and the optimal strategy for HARA utility function.

• Journal of the Korean Operations Research and Management Science Society
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• v.22 no.1
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• pp.51-58
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• 1997

In this paper, we propose a stochastic LP model for determining an optimal input quantity in a single-product multi-stage production system with random yields. Due to the random yields in our model, each stage of the production system can result in defective items, which can be re-processed or scrapped at certain costs. We assume that the random yield at each stage follows an independent discrete empirical distribution. Compared to dynamic programming models that prevail in the literature, our model can easily handle problems of larger sizes.

• Communications of the Korean Mathematical Society
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• v.28 no.3
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• pp.615-633
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• 2013

We use a power series expansion method to get an analytic approximation value for the quanto option price under the Hull and White stochastic volatility model, which turns out to be accurate enough by comparing with the simulation prices using Monte Carlo method.

• The Korean Journal of Financial Management
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• v.22 no.2
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• pp.43-69
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• 2005

This study provides empirical evidence that the stochastic beta model based on Bayesian analysis outperforms the existing conditional beta model and GARCH model in terms of the estimation accuracy and the explanatory power in the cross-section of stock returns in Korea. Betas estimated by the stochastic beta model explain $30{\sim}50%$ of the cross-sectional variation in stock-returns, whereas other time-varying beta models account for less than 3%. Such a difference in explanatory power across models turns out to come from the fact that the stochastic beta model absorbs the variation due to the market anomalies such as size, BE/ME, and idiosyncratic volatility. These results support the rational asset pricing model in that market anomalies are closely related to the variation of expected returns generated by time-varying betas.