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 …

The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for … individual stock options, equity returns, and interest rates. -- Volatility Smile ; Volatility Smirk ; Implied Volatility …

primarily due to the pricing of market volatility risk. When volatility risk is priced, expected option returns match the … differential impact of the volatility risk premium on expected option returns, we also find that the market volatility risk premium …

In this paper, we review the most common specifications of discrete-time stochastic volatility (SV) models and … indices and foreign exchange rates. -- Stochastic volatility ; Markov chain Monte Carlo ; Metropolis-Hastings algorithm Jump …

existing methods lies in its straightforward extension 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 …

the pricing of European-style foreign currency options and for the volatility strike structure implicit in these contracts … is devoloped. The curvature of the volatility strike structure is explained by focusing attention on the expected … characteristic convex shape of volatility strike structures documented in the empirical literature. A volatility-based test for …