We incorporate a simple and effective control-variate into Fourier inversion formulas for vanilla option prices. The control-variate used in this paper is the Black-Scholes formula whose volatility parameter is determined in a generic non-arbitrary fashion. We analyze contour dependence both in...

In this paper, we present an efficient approach to compute the first and the second order price sensitivities in the Heston model using the algorithmic differentiation approach. Issues related to the applicability of the pathwise method are discussed in this paper as most existing numerical...

Although the effect of interest rate stochasticity can safely be ignored for short-dated exchange traded volatility derivatives, this is not the case for the kind of long-dated OTC derivatives often used by insurance companies and other financial institutions. We therefore extend existing...

A key requirement of any equity hybrid derivatives pricing model is the ability to rapidly and accurately calibrate to vanilla option prices. To this end, we present two methods for calibrating a local volatility model under correlated stochastic interest rates. This is achieved by first fitting...

Stochastic volatility, local volatility and stochastic interest rates are three of the most important extensions to the standard Black-Scholes framework. Although much work has been done on models incorporating one or two of these extensions, very little has been done on the combination of all...