The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for …

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

This paper presents a new numerical method for pricing American call options when the volatility of the price of the … volatility changes, we derive an integral representation of an American call price and the early exercise premium which holds … under stochastic volatility. This representation is used to develop a numerical method for pricing the American options …

stochastically correlated default intensities, ormultivariate dynamic portfolio choice with volatility and correlation jumps. We then … dynamic portfolio choice. First, we find that a three-factor matrix AJD model can generatevariations of the implied volatility … skew term structures that are largely unrelated to the level andcomposition of the spot volatility.[...] …

This paper provides regime-switching stochastic volatility extensions of the LIBOR market model. First, the … instantaneous forward LIBOR volatility is modulated by a continuous time homogeneous Markov chain. In a second parameterization, the … volatility is modelled by a square root process with a regime-switching reference level. We obtain analytical solutions for the …

new explanation of the smile pattern of implied volatility related to the lack of market liquidity. Finally we present …

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