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 …

The study considers a stochastic local volatility model with domestic and foreign stochastic interest rates and … identifies a bias with respect to the deterministic local volatility with deterministic rates. Relating the local volatility of … same random variable for all time and deterministic zero-coupon bond volatility functions, the bias term simplifies and can …

first introduce the GPU programming and the SABR stochastic volatility model. We then discuss pricing options with quasi …

models and therefore allows to consistently construct models including general jump structures, a stochastic volatility and … including jumps, a stochastic volatility and the leverage effect tend to be over-parameterized leading to unstable prices of …

implied index value and implied volatility whereas the restricted model only solves the implied volatility. Next, this study … for calls. Volatility for calls has no significant effect on the index pricing error. The path-dependent effect on index …

In this paper we derive an easily computed approximation of Rogers and Shi's lower bound for a local volatility jump …-diffusion model and then use it to approximate European basket option values. If the local volatility function is time independent …

option under jump-diffusion, stochastic interest rate and local volatility. The corresponding forward Kolmogorov partial …

patterns of implied volatility can actually be reproduced as a consequence of dynamical hedging. The simulations are performed … theoretical and quantitative point of view the strong pricing biases of the Black-Scholes formula, although stochastic volatility …

We calibrate the local volatility surface for European options across all strikes and maturities of the same underlying …. There is no interpolation or extrapolation of either the option prices or the volatility surface. We do not make any … assumption regarding the shape of the volatility surface except to assume that it is smooth. Due to the smoothness assumption, we …