The Heston model stands out from the class of stochastic volatility (SV) models mainly for two reasons. Firstly, the … process for the volatility is nonnegative and mean-reverting, which is what we observe in the markets. Secondly, there exists …. -- Heston model ; vanilla option ; stochastic volatility ; Monte Carlo simulation ; Feller condition ; option pricing with FFT …

This paper proposes the new concept of stochastic leverage in stochastic volatility models.Stochastic leverage refers … stochastic volatility process. We provide a systematic treatment of stochastic leverage and propose to model the stochastic … tractable and allow for a direct economic interpretation. In particular, we propose two new stochastic volatility models which …

implemented and do not contain any numerical integration.These formulas are important in volatility surface construction and CMS …

method consists of specifying the joint distribution of the volatility and underlying at a given expiry and requires the … obtained as one-dimensional integrals. The specification of the volatility function is flexible and allows additional control …

limit of an asymmetric GARCH model risk-neutralized via Wang's transform. The connection with stochastic volatility limits …

condition, which assigns some fixed value to the stochastic volatility subprocess, is illogical and greatly underestimates the … effect of the hidden variable. For instance, a stochastic volatility model generates a significantly weaker implied … volatility smile at short maturities. A good initial condition should specify the distribution of the hidden variable instead of …

Stochastic volatility models are widely used in interest rate modeling to match the option smiles -- the two most …, Heston-LMM and SABR-LMM respectively.In this paper we consider the CEV model with a general stochastic volatility. Assuming … that rate-volatility correlation is zero we are able to obtain an exact integral representation of the option price …

In this paper we examine the Heston model in the limit of infinitely fast mean-reversion for the stochastic volatility … process (CIR). We show that, under an appropriate scaling of the model parameters, the two-factor stochastic volatility Heston … properties of the implied volatility surface. The model is expected to provide a reasonable fit to the market for all maturities …