It is known that Heston's stochastic volatility model exhibits moment explosion, and that the critical moment s+ can be obtained by solving (numerically) a simple equation. This yields a leading-order expansion for the implied volatility at large strikes: σBS(k, T)2T ∼ Ψ(s+ - 1) × k (Roger...

This paper investigates the pricing bias in the Swedish OMX-Index Option market and how a stochastic volatility affects European call option prices. The market is purely European and without dividends for the period studied. A CIR square-root process for the volatility is estimated with...

This paper investigates the pricing bias in the Swedish OMX-Index Option market and how a stochastic volatility affects European call option prices. The market is purely European and without dividends for the period studied. A CIR square-root process for the volatility is estimated with...

Suppose a two-dimensional dynamical system has a stable attractor that is surrounded by an unstable limit cycle. If the system is additively perturbed by white noise, the rate of escape through the limit cycle will fall off exponentially as the noise strength. The presence of this slowly...