We employ a refined tree method to value employee stock options (ESOs) in the stochastic volatility model of Heston …. Our setting covers risk-averse employees maximizing expected utility where we in particular focus on subjective option … valuation, personal market beliefs and stochastic volatility. We formulate theoretical results on ESO valuation independently of …

and portfolios. We document that the SDF is dense in characteristics with the impliedrealized volatility spread, option … return momentum, and jump risk emerging as the most likely included factors. Noteworthy, we find that (i) our results remain …

We present a new option-pricing model, which explicitly captures the difference in the persistence of volatility under … historical and risk-neutral probabilities. The model also allows to capture the empirical properties of pricing kernels, such as … time-variation and the typical S-shape. We apply our model for two purposes. First, we analyze the risk preferences of …

In this paper we investigate the asymptotics of forward-start options and the forward implied volatility smile in the …

options under low-dimensional stochastic volatility models. We derive multidimensional transforms which allow us to construct … efficient path-independent lattices for virtually all low-dimensional stochastic volatility models given in the literature … including one volatility factor-based stochastic volatility (SV) models, two volatility factors-based SV models, stochastic …

, and the corresponding implied volatility surfaces have been analyzed in some detail. In the non-asymptotic regimes, option … trivially expressed in terms of their implied volatility. Recently, attempts at calculating the asymptotic limits of the implied … volatility have yielded several expressions for the short-time, long-time, and wing asymptotics. In order to study the volatility …

between stock returns and idiosyncratic return volatility at the firm level. By allowing for the volatility of the underlying … idiosyncratic choice variables to exhibit independent switches between a high and low volatility regime, we show that the options …' constant expected returns are composed of (i) a state dependent drift term that relates positively with the volatility regime …

Volatility and Stochastic Interest rates. In this paper, we examine the combine effect of a Heston-type model for the underlying … see that stochastic volatility and stochastic interest rates have an impact on the resulting fair value of the contract … and the resulting fair fee as well as mainly on the vega hedge. Interestingly, using a stochastic volatility model leads …

We extend upon the saddle-point equation presented in [1] to derive large-time model-implied volatility smiles … the same manner as stochastic-volatility-inspired (SVI) …