Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Subscribe Now
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Derivatives
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Subscribe Now
  • Log in
The Journal of Derivatives

The Journal of Derivatives

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter
Article

Implied ICA: Factor Extraction and Multiasset
Derivative Pricing

Andrew Kumiega, Thaddeus Neururer and Ben Van Vliet
The Journal of Derivatives Summer 2012, 19 (4) 39-52; DOI: https://doi.org/10.3905/jod.2012.19.4.039
Andrew Kumiega
is the director of quality at Infinium Capital Management, LLC, and serves as an adjunct faculty member at the Stuart School of Business, Illinois Institute of Technology, in Chicago, IL.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: akumiega@iit.edu
Thaddeus Neururer
is a research assistant at Boston University’s School of Management in Boston, MA.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: thadn@bu.edu
Ben Van Vliet
is a lecturer at the Stuart School of Business, Illinois Institute of Technology, in Chicago, IL.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: bvanvliet@stuart.iit.edu
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.
Don’t have access? Sign up today to begin your trial to the PMR platform 

Abstract

This article presents a different approach to modeling the return dynamics for a portfolio. The component stocks are all assumed to be exposed to shocks from a small number of independent factors, each of which follows a Heston-type square root diffusion process. To illustrate the model, the authors construct a portfolio of the three biotech stocks that have the largest weightings among the twelve stocks in the BBH ETF portfolio, assuming there are only two independent factors. The estimated variance equations show that the more important factor, Factor 1, has high volatility and is rapidly mean reverting, while Factor 2 reverts more slowly and steadily toward a low value. Theoretical values for options on the three-stock portfolio obtained by simulation should be approximately the same as traded option contracts on the BBH index. The fitted volatility smiles under the model are similar to those observed for BBH, but with some notable discrepancies.

  • © 2012 Pageant Media Ltd
View Full Text

Don’t have access? Register today to begin unrestricted access to our database of research.

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Derivatives: 19 (4)
The Journal of Derivatives
Vol. 19, Issue 4
Summer 2012
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Derivatives.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Implied ICA: Factor Extraction and Multiasset Derivative Pricing
(Your Name) has sent you a message from The Journal of Derivatives
(Your Name) thought you would like to see the The Journal of Derivatives web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Implied ICA: Factor Extraction and Multiasset
Derivative Pricing
Andrew Kumiega, Thaddeus Neururer, Ben Van Vliet
The Journal of Derivatives May 2012, 19 (4) 39-52; DOI: 10.3905/jod.2012.19.4.039

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Implied ICA: Factor Extraction and Multiasset
Derivative Pricing
Andrew Kumiega, Thaddeus Neururer, Ben Van Vliet
The Journal of Derivatives May 2012, 19 (4) 39-52; DOI: 10.3905/jod.2012.19.4.039
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • LITERATURE REVIEW
    • RISK-NEUTRAL DYNAMICS AND OPTION PRICING
    • CONNECTION TO INDEPENDENT COMPONENT ANALYSIS
    • COMPARISONS AND BENEFITS OF IMPLIED ICA-SV
    • EXAMPLE
    • RESULTS
    • CONCLUSION
    • APPENDIX
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar

More in this TOC Section

  • Editor’s Letter
  • Editor’s Letter
  • Interviews with Researchers Who Started Their Career in Physics but Moved to Finance
Show more Article
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 1074-1240 | E-ISSN: 2168-8524

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies