Beta and rho parameters are redundant in terms of fit - you can vary one and fix another with the same fit error. So your betas may vary a lot (and your rhos probably vary a lot as well) because there is a "free" parameter. I suggest you fix beta ( 0, 1/2, or 1 are typical choices depending on your asset class) , or fix rho , and then other parameter will be more stable.
Yes 3 (4) parameters are not enough, I used 5 parameters for market making and was able to fit almost all US ETFs and about 1000 stocks. In your case, call wing is very cheap - it is just a bad fit. Either there is some weird constraint, or you need to add parameters.
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Yes 3 (4) parameters are not enough, I used 5 parameters for market making and was able to fit almost all US ETFs and about 1000 stocks. In your case, call wing is very cheap - it is just a bad fit. Either there is some weird constraint, or you need to add parameters.
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