In the past years, there has been an extensive investigation of the class of stochastic volatility models for the …-Scholes economy and accounting for discrepancies between observation and predictions in the simple log-normal, constant-volatility … model. In this paper, we study the structure of an options market with a stochastic volatility that will eventually vanish …

In this paper, we introduce a 3D finite dimensional Gaussian process (GP) regression approach for learning arbitrage … is proven to be arbitrage-free along the strike direction (butterfly and call-spread arbitrages are precluded on the … entire 3D input domain). The cube is free from static arbitrage along the tenor and maturity directions if swaption prices …

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 …

The characteristic functions of many affine jump-diffusion models, such as Heston’s stochastic volatility model and all …