Although the effect of interest rate stochasticity can safely be ignored for short-dated exchange traded volatility … institutions. We therefore extend existing model-free results for the pricing of variance swaps and more general volatility …

We construct multi-currency models with stochastic volatility and correlated stochastic interest rates with a full … interest rate by a stochastic volatility displaced-diffusion Libor Market Model [AA02], which can model an interest rate smile …

We define an equity-interest rate hybrid model in which the equity part is driven by the Heston stochastic volatility … [Hes93], and the interest rate (IR) is generated by the displaced-diffusion stochastic volatility Libor Market Model [AA02 …

We study a new class of three-factor affine option pricing models with interdependent volatility dynamics and a … stochastic skewness component unrelated to volatility shocks. These properties are useful in order (i) to model a term structure … of implied volatility skews more consistent with the data and (ii) to capture comovements of short and long term skews …

straddles; second, we estimate the PVR in a Heston (1993) stochastic-volatility model. In both cases, the estimation is … more negative and its term structure is steeper when volatility is high. These findings are inconsistent with calibrations …

Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews … components are highly correlated with the S&P500 index option volatility, skew, and term structure respectively. We develop an …

We provide an efficient swaption volatility approximation for longer maturities and tenors, under the lognormal forward …-LIBOR model. In particular, we approximate the swaption volatility with a mean update of the spanning forward rates. Since the …