characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in … market volatility, with significant impact on pricing and forecasting of market volatility. The implication is that models … that accomodate long memory hold the promise of improved long-run volatility forecast as well as accurate pricing of long …

In this paper we propose a Libor model with a high-dimensional speciallystructured system of driving CIR volatility …

The volatility implied by observed market prices as a function of the strikeand time to maturity form an Implied … Volatility Surface (IV S). Practicalapplications require reducing the dimension and characterize its dynamicsthrough a small … investigating long range dependencein the factor loadings series. Our result reveals that shocks to volatility persistfor a very …

A primary goal in modelling the implied volatility surface (IVS) for pricing andhedging aims at reducing complexity … approach, however, neglects the degenerated string structure of the implied volatility data and may result in a modelling bias … generalized vega-hedging strategy for exotic options that are priced in the local volatility framework. The generalized vega …

option prices. But some of its assumptions, like constant volatility or log-normal distribution of asset prices,do not find … implied volatility surface. To overcome this problem Carr and Madan (1999) developed a fast method to compute option prices …

-diffusion process with stochastic volatility. Agents haveCRRA utility, but differ with respect to their degree of risk aversion. The … than the more risk-averse one. Volatility derivatives, onthe other hand, are special in the sense that the direction of …

stochastic volatility, where both the dividend itselfand its volatility can jump. We work in a complete markets economy and … andexpected stock returns. It causes a significant trading volume in derivatives and isone of the reasons for excess volatility …. In our model, excess volatility is also causedby stochastic volatility and can thus be observed even in the homogeneous …

variance contract under different scenarios, namely underpure estimation risk (or parameter risk) in a stochastic volatility … volatility instead of jumps or vice versa), and under modelrisk when risk factors are omitted (e.g. when the true model contains …