Co-movements, option pricing and risk management: an application to WTI versus Brent spread options
研究一种允许共同波动和共同偏度的广义二元正态分布，用于快速定价价差期权并推导希腊字母，通过WTI与布伦特原油价差期权数据验证其捕捉市场特征的能力，并分析共同波动对投资组合风险管理的影响。
Co-moments of asset returns play a major role in financial contagion during crises. We study the properties of a particular specification of the generalized bivariate normal distribution which allows for co-volatility and co-skewness. With this probability distribution, formulae for single-name and exchange options can be evaluated quickly since they are based on one-dimensional integrals. We provide a very precise approximation formula for spread option prices and derive the corresponding greeks. We perform a day-to-day re-estimation of the probability distribution on a dataset of WTI vs Brent spread options, showing the ability of this specification to capture the salient empirical features observed in the market. Finally, we show the impact of co-movements on portfolio risk management.