underlying, their exposure to volatility risk, and their time decay. Our contribution to the literature is twofold: First, we … volatility according to Heston (1993). Within this setting, the portfolio returns are explained by the market and an additional … option factor, i.e., a portfolio of standard options exposed to volatility risk. We show that (i) any option factor is …

for arithmetic Asian options with discrete and continuous monitoring featuring stochastic volatility and discontinuous … properties. We here estimate the stochastic volatility model with price jumps as well as the nested model with omitted jumps to … NYMEX WTI futures vanilla options. We find that price jumps and stochastic volatility are necessary to fit options. Despite …

Based on the fact that realized measures of volatility are affected by measurement errors, we introduce a new family of … discrete-time stochastic volatility models having two measurement equations relating both observed returns and realized … realized measures in inflating the latent volatility persistence - the crucial parameter in pricing Standard and Poor's 500 …

Stochastic volatility, local volatility and stochastic interest rates are three of the most important extensions to the …

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 …

.We address the problem of the consistency of the Black-Scholes model with the volatility surface and we show that, under general … conditions, the Black-Scholes formula cannot be generalized to account for the volatility smile …

performance analysis is made of the single and multiple curve LFPM, where we include four deterministic volatility specifications …-Exponential Volatility (LEV) specification and that deterministic breakpoints should be included, rather than random breakpoints …