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 …

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 …