, which is defined as the ratio between the realized volatility and trading volume and which refines the popular price impact … measure proposed by Amihud (2002). In our model, both price volatility and market liquidity are assumed to follow stochastic … processes in continuous time. In this setting, characterized by stochastic volatility and liquidity, we prove that the realized …

The implied volatility from Black and Scholes (1973) model has been empirically tested for the forecasting performance … of future volatility and commonly shown to be biased. Based on the belief that the implied volatility from option prices … is the best estimate of future volatility, this study tries to find out a better model, which can derive the implied …

volatility level. Single-factor stochastic volatility models are not flexible enough to account for the stochastic behavior of … the skew. On the other hand, multifactor stochastic volatility models are able to account for the existence of stochastic … that the consideration of additional volatility factors in the context of stochastic volatility models allows us to …

a Brownian motion with stochastic volatility. We derive formulas for conditional default probabilities and credit … spreads. An example for a volatility process is the square root of a Levy-driven Ornstein-Uhlenbeck process, for which we show … that jumps in the volatility translate into jumps in credit spreads. We examine the dynamics of the model and provide …

models with stochastic volatility. This formula makes it feasible to include quoted CMS spread option prices in the general …

to model a credit quality process as an Ito integral with respect to a Brownian motion with a stochastic volatility … conditional default probabilities and credit spreads. An example for a volatility process is the square root of a Levy …