, especially on the BS implied volatility. Implied binomial trees (IBT) models capture the variations of the implied volatility … known as "volatility smile". They provide a discrete approximation to the continuous risk neutral process for the underlying … Barle and Cakici (BC). After the formation of IBT we can estimate the implied local volatility and the state price density …

this end, we calibrate the Heston model to a time series of DAX implied volatility surfaces and then price cliquet options …. -- calibration ; data design ; implied volatility surface ; Heston model ; cliquet option …

The Heston model stands out from the class of stochastic volatility (SV) models mainly for two reasons. Firstly, the … process for the volatility is nonnegative and mean-reverting, which is what we observe in the markets. Secondly, there exists …. -- Heston model ; vanilla option ; stochastic volatility ; Monte Carlo simulation ; Feller condition ; option pricing with FFT …

We develop a discrete-time stochastic volatility option pricing model, which exploits the information contained in high …-frequency data. The Realized Volatility (RV) is used as a proxy of the unobservable log-returns volatility. We model its dynamics by … competing time-varying (i.e. GARCH-type) and stochastic volatility pricing models. The pricing improvement can be ascribed to …

financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of G … this more complex situation and consider stock price dynamics which exclude arbitrage opportunities. Due to volatility … claims and deduce explicit results in a Markovian setting. -- Pricing of contingent claims ; incomplete markets ; volatility …

along with the specification of (a) the initial density, and (b) the volatility structure of the density. The volatility …

We are concerned with the valuation of European options in Heston's stochastic volatility model with correlation. Based …'s solution based on Fourier inversion and investigate the accuracy of the derived pricing formulae. -- Stochastic volatility …