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 …

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 article, we show how to calibrate the widely-used SVI parameterization of the implied volatility smile in such … volatility surfaces with a simple closed-form representation. We demonstrate the high quality of typical SVI fits with a …

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 …

an alternative parameterization in terms of the ATM volatility, volatility floor and tilt parameter that is better suited …

This paper addresses several theoretical and practical issues in option pricing and implied volatility calibration in a … volatility term structure when the Hurst exponent is not 0.5, and also that one-year implied volatility is independent of Hurst … exponent and equivalent to fractional volatility. Building on these observations, we introduce a novel 8-parameter fractional …

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 …

log-returns and their volatility with the aim of analysing which risk factors and which distribution features provide a …-returns and volatility offer the best trade-off between model performance and parsimony …

This paper provides a simple way to obtain an option-implied asset volatility surface. The proposed estimation … technique allows to estimate the unobservable asset volatility surface in the same fashion of what is done when equity … volatility is extracted from options. Given a sample of 66 US firms, the asset volatility is first estimated at the firm level …