Local volatility model is a relatively simple way to capture volatility skew/smile. In spite of its drawbacks, it … products, in order to take into account the effect of stochastic interest rate on equity price volatility stochastic interest … rate is often modelled together with stochastic equity price. Similar to local volatility model with deterministic interest …

In this paper, we propose a new Heston based stochastic volatility model for stock price and option pricing, which not … only captures the volatility smile, but also naturally captures the stochastic volatility of volatility. It's more …

We develop a new efficient and analytically tractable method for estimation of parametric volatility models that is …-day data into the Realized Laplace Transform of volatility, which is a model-free and jump-robust estimate of daily integrated … empirical Laplace transform of the unobservable volatility. The estimation then is done by matching moments of the integrated …

The paper studies methods of dynamic estimation of volatility for financial time series. We suggest to estimate the … volatility as the implied volatility inferred from some artificial 'dynamically purified' price process that in theory allows to … order Taylor series extrapolation and quadratic interpolation. We examine the potential of the implied volatility derived …

This paper shows how to recover stochastic volatility models (SVMs) from market models for the VIX futures term … obtained by inverting the market model. This paper's main result is a method for the recovery of a stochastic volatility …

We develop a discrete-time stochastic volatility option pricing model, which exploits the information contained in high …-frequency data. The Realized Volatility (RV) is used as a proxy of the unobservable log-returns volatility. We model its dynamics by … competing time-varying (i.e. GARCH-type) and stochastic volatility pricing models. The pricing improvement can be ascribed to …

financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of G … this more complex situation and consider stock price dynamics which exclude arbitrage opportunities. Due to volatility … claims and deduce explicit results in a Markovian setting. -- Pricing of contingent claims ; incomplete markets ; volatility …

We are concerned with the valuation of European options in Heston's stochastic volatility model with correlation. Based …'s solution based on Fourier inversion and investigate the accuracy of the derived pricing formulae. -- Stochastic volatility …

While the stochastic volatility (SV) generalization has been shown to improvethe explanatory power compared to the … then investigate the respectiveeffect of stochastic interest rate, systematic volatility and idiosyncraticvolatility on … thesystematc volatility of the consumption process, our estimation results suggestthat the short-term interest rate fails to be a …