In this paper the performance of locally risk-minimizing hedge strategies for European options in stochastic volatility … large class of diffusion-type stochastic volatility models, and they are as easy to implement as usual delta hedges. Our … periods as well as in different markets). The more skewed the market and the more out-of-the-money the option, the higher the …

existing methods lies in its straightforward application to models with stochastic volatility and stochastic interest rates. We … exploit this advantage by providing an analysis of the impact of volatility mean-reversion, volatility of volatility, and …

In this paper we construct arbitrage-free market models of stochastic volatility type for one stock, one bank account … maturities in a natural way. Option prices are explicit functions of the local implied volatilities and price level, and absence … provide a class of explicit examples satisfying the no-arbitrage conditions. This allows us to construct arbitrage-free multi-option …

and economically strong effect on the implied volatility of currency options, on the shap e of the implied volatility … smile, on the volatility risk-premia, and on future currency returns. We do cument that the volatility of macro economic …

volatility and risk aversion that are similar to the ones observed in the data. In addition, the model produces an implied …

We derive a closed-form asymptotic expansion formula for option implied volatility under a two-factor jump … free of the unobserved spot volatility. Therefore, the model can be calibrated on option data pooled across different …-diffusion stochastic volatility model when time-to-maturity is small. Based on numerical experiments we describe the range of time …

. The analysis is performed in the framework of a two-factor model with local and stochastic volatility. We describe an … algorithm for building the power series approximation of implied volatility. In the case of CEV volatility of volatility we …