Related papers: New solvable stochastic volatility models for pric…

In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modelling framework extends the Heston stochastic…

We consider a special family of occupation-time derivatives, namely proportional step options introduced by Linetsky in [Math. Finance, 9, 55--96 (1999)]. We develop new closed-form spectral expansions for pricing such options under a class…

The rough Bergomi (rBergomi) model can accurately describe the historical and implied volatilities, and has gained much attention in the past few years. However, there are many hidden unknown parameters or even functions in the model. In…

In a financial market model, we consider the variance-optimal semi-static hedging of a given contingent claim, a generalization of the classic variance-optimal hedging. To obtain a tractable formula for the expected squared hedging error…

This paper develops a European option pricing formula for fractional market models. Although there exist option pricing results for a fractional Black-Scholes model, they are established without accounting for stochastic volatility. In this…

Stochastic volatility (SV) models are nonlinear state-space models that enjoy increasing popularity for fitting and predicting heteroskedastic time series. However, due to the large number of latent quantities, their efficient estimation is…

We consider an asset whose risk-neutral dynamics are described by a general class of local-stochastic volatility models and derive a family of asymptotic expansions for European-style option prices and implied volatilities. Our implied…

We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…

The sub-fractional Brownian motion (sfBm) is a stochastic process, characterized by non-stationarity in their increments and long-range dependency, considered as an intermediate step between the standard Brownian motion (Bm) and the…

In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…

We study the pricing problem for a European call option when the volatility of the underlying asset is random and follows the exponential Ornstein-Uhlenbeck model. The random diffusion model proposed is a two-dimensional market process that…

We analyse a Monte Carlo particle method for the simulation of the calibrated Heston-type local stochastic volatility (H-LSV) model. The common application of a kernel estimator for a conditional expectation in the calibration condition…

It is a market practice to express market-implied volatilities in some parametric form. The most popular parametrizations are based on or inspired by an underlying stochastic model, like the Heston model (SVI method) or the SABR model (SABR…

In this paper, we study a family of stochastic volatility processes; this family features a mean reversion term for the volatility and a double CEV-like exponent that generalizes SABR and Heston's models. We derive approximated closed form…

It is known that the implied volatility skew of FX options demonstrates a stochastic behavior which is called stochastic skew. In this paper we create stochastic skew by assuming the spot/instantaneous variance correlation to be stochastic.…

A Levy-driven Ornstein-Uhlenbeck process is proposed to model the evolution of the risk-free rate and default intensities for the purpose of evaluating option contracts on a credit index. Time evolution in credit markets is assumed to…

We propose Variational Heteroscedastic Volatility Model (VHVM) -- an end-to-end neural network architecture capable of modelling heteroscedastic behaviour in multivariate financial time series. VHVM leverages recent advances in several…

In the first part of this thesis, we focus on American options in the Heston model. We first give an analytical characterization of the value function of an American option as the unique solution of the associated (degenerate) parabolic…

We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…

This article establishes an asymptotic theory for volatility estimation in an infinite-dimensional setting. We consider mild solutions of semilinear stochastic partial differential equations and derive a stable central limit theorem for the…