Most of the empirical studies on stochastic volatility dynamics favor the 3/2 specification over the square-root (CIR …) process in the Heston model. In the context of option pricing, the 3/2 stochastic volatility model is reported to be able to … capture the volatility skew evolution better than the Heston model. In this article, we make a thorough investigation on the …

This article proposes a simple and intuitive framework to combine a discrete volatility forecast series produced by a …-combining binomial trees that capture the distributional properties of the volatility forecasts. Finally, the framework is employed to …

volatility factors while maintaining a Nelson-Siegel factor loading structure. The price of the interest rate derivatives …

-form Hermite series expansion for a stochastic volatility model with the stochastic variance process driven by an affine drift term …. We implement the methodology for the Heston and the mean-reverting CEV stochastic volatility models. A calibration …

derivatives in a stochastic volatility model with jumps. This is motivated by the recent developments of the VIX derivatives … exposure to the volatility risk as compared to equity derivatives. Based on the closed-form formula. we determine explicitly … the portfolio improvement brought by the inclusion of the VIX derivative, and establish that it is positive theoretically …

, seasonalities, and stochastic volatility. In particular, we investigate the pricing procedures for electricity swaps and options in …

its instantaneous variance. Under the affine jump-diffusion formulation with stochastic volatility, analytic integral … futures and both European and American options under the affine model and 3/2-model. We also examine the implied volatility …