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 …

Implied volatility is one of the key issues in modern quantitative finance, since plain vanilla option prices contain … yield low dimensional representations of the implied volatility surface (IVS). We discussestimation issues of the model and …

implied volatilities (IV) plays an important role, since volatility is the crucial parameter in the Black-Scholes (BS) pricing … known as volatility smiles or smirks that contradict the assumption of constant volatility in the BS pricing model. On the …

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 …

symbolic level are applied to predict the daily change in volatility of two major stock indices.... …

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 …-option market models with a prespecified volatility structure. …

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 …