Related papers: The Jacobi Stochastic Volatility Model
This paper presents a methodology to introduce time-dependent parameters for a wide family of models preserving their analytic tractability. This family includes hybrid models with stochastic volatility, stochastic interest-rates, jumps and…
Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We introduce a…
In this paper, we investigate a portfolio selection problem with transaction costs under a two-factor stochastic volatility structure, where volatility follows a mean-reverting process with a stochastic mean-reversion level. The model…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
Our goal is to analyze the system of Hamilton-Jacobi-Bellman equations arising in derivative securities pricing models. The European style of an option price is constructed as a difference of the certainty equivalents to the value functions…
We introduce a simple stochastic volatility model, whose novelty consists in taking into account hitting times of the asset price, and study the optimal stopping problem corresponding to a put option whose time horizon (after the asset…
Exact path simulation of the underlying state variable is of great practical importance in simulating prices of financial derivatives or their sensitivities when there are no analytical solutions for their pricing formulas. However, in…
This paper introduces the Inverse Gamma (IGa) stochastic volatility model with time-dependent parameters, defined by the volatility dynamics $dV_{t}=\kappa_{t}\left(\theta_{t}-V_{t}\right)dt+\lambda_{t}V_{t}dB_{t}$. This non-affine model is…
In this paper similar to [P. Carr, A. Itkin, 2019] we construct another Markovian approximation of the rough Heston-like volatility model - the ADO-Heston model. The characteristic function (CF) of the model is derived under both…
There are several approaches to modeling and forecasting time series as applied to prices of commodities and financial assets. One of the approaches is to model the price as a non-stationary time series process with heteroscedastic…
We consider rough stochastic volatility models where the variance process satisfies a stochastic Volterra equation with the fractional kernel, as in the rough Bergomi and the rough Heston model. In particular, the variance process is…
A third-order approximation for close-to-the-money European option prices under an infinite-variation CGMY L\'{e}vy model is derived, and is then extended to a model with an additional independent Brownian component. The asymptotic regime…
In this article, we provide representations of European and American exchange option prices under stochastic volatility jump-diffusion (SVJD) dynamics following models by Merton (1976), Heston (1993), and Bates (1996). A Radon-Nikodym…
Classical solvable stochastic volatility models (SVM) use a CEV process for instantaneous variance where the CEV parameter $\gamma$ takes just few values: 0 - the Ornstein-Uhlenbeck process, 1/2 - the Heston (or square root) process, 1-…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
We consider the computation of free energy-like quantities for diffusions in high dimension, when resorting to Monte Carlo simulation is necessary. Such stochastic computations typically suffer from high variance, in particular in a low…
We present an alternative formula to price European options through cosine series expansions, under models with a known characteristic function such as the Heston stochastic volatility model. It is more robust across strikes and as fast as…
This paper focuses on the pricing of continuous geometric Asian options (GAOs) under a multifactor stochastic volatility model. The model considers fast and slow mean reverting factors of volatility, where slow volatility factor is…
We consider a stochastic volatility asset price model in which the volatility is the absolute value of a continuous Gaussian process with arbitrary prescribed mean and covariance. By exhibiting a Karhunen-Lo\`{e}ve expansion for the…