In this paper, we present a stochastic volatility model with stochastic interest rates in a Foreign Exchange (FX …) setting. The instantaneous volatility follows a mean-reverting Ornstein–Uhlenbeck process and is correlated with the exchange …

volatility model with the CIR (Econometrica, Vol. 53, pp. 385–408, 1985) stochastic interest rates. The instantaneous volatility …

In this paper, we propose a general framework for the valuation of options in stochas-tic local volatility (SLV) models … as special cases. Standard stochastic volatility models, such as Heston, Hull-White, Scott, Stein-Stein, α …-Hypergeometric, 3/2, 4/2, mean-reverting, and Jacobi stochastic volatility models, also fall within this general framework. We propose a …

volatility from quoted options. The latter is of particular importance since it indicates the risk of the underlying and it is … approximating error of the suggested solution and, by comparing our results in computing the implied volatility with the most common …

volatility (RV). The RV measure is selected because it uniquely exhibits simultaneous stationarity and long-range dependency …

well as for extracting the implied volatility from quoted options. The latter is of particular importance since it … approximating error of the suggested solution and, by comparing our results in computing the implied volatility with the most common …

We discuss a competitive alternative to stochastic local volatility models, namely the Collocating Volatility (CV … evaluated and a local volatility function. The latter, based on stochastic collocation – e.g. Babuska et al. (2007), Witteveen …