Related papers: A Flexible Commodity Skew Model with Maturity Effe…

We propose a new static parameterization of the implied volatility surface which is constructed by using polynomials of sigmoid functions combined with some other terms. This parameterization is flexible enough to fit market implied…

Based on a criterion of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity…

Recently Carr and Wu (2004, 2005) and also Huang and Wu (2004) show that most stochastic processes used in traditional option pricing models can be cast as special cases of time-changed L\'evy processes. In particular these are models which…

In some options markets (e.g. commodities), options are listed with only a single maturity for each underlying. In others, (e.g. equities, currencies), options are listed with multiple maturities. In this paper, we provide an algorithm for…

We propose Monte Carlo calibration algorithms for three models: local volatility with stochastic interest rates, stochastic local volatility with deterministic interest rates, and finally stochastic local volatility with stochastic interest…

In [1], we calibrated a one-factor Cheyette SLV model with a local volatility that is linear in the benchmark forward rate and an uncorrelated CIR stochastic variance to 3M caplets of various maturities. While caplet smiles for many…

Pricing and hedging exotic options using local stochastic volatility models drew a serious attention within the last decade, and nowadays became almost a standard approach to this problem. In this paper we show how this framework could be…

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…

We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the…

We consider a dynamic market model of liquidity where unmatched buy and sell limit orders are stored in order books. The resulting net demand surface constitutes the sole input to the model. We prove that generically there is no arbitrage…

We consider the at-the-money strike derivative of implied volatility as the maturity tends to zero. Our main results quantify the behavior of the slope for infinite activity exponential L\'evy models including a Brownian component. As…

In this paper we study the short-time behavior of the at-the-money implied volatility for European and arithmetic Asian call options with fixed strike price. The asset price is assumed to follow the Bachelier model with a general stochastic…

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.…

In order to enhance the modeling of metallic materials behavior in non proportional loadings, a modification of the classical elastic-plastic models including distortion of the yield surface is proposed. The new yield criterion uses the…

The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with…

We explore a link between stochastic volatility (SV) and path-dependent volatility (PDV) models. Using assumed density filtering, we map a given SV model into a corresponding PDV representation. The resulting specification is lightweight,…

In this article we look at stochastic processes with uncertain parameters, and consider different ways in which information is obtained when carrying out observations. For example we focus on the case of a the random evolution of a traded…

We extend the short rate model of Turfus and Romero-Berm\'udez [2021] to facilitate accurate arbitrage-free analytic pricing of SOFR, SONIA or ESTR caplets, i.e. options on backward-looking compounded rates payments, in a manner consistent…

We propose an alternative approach towards cost mitigation in volatility-managed portfolios based on smoothing the predictive density of an otherwise standard stochastic volatility model. Specifically, we develop a novel variational Bayes…

Multifractal processes are a relatively new tool of stock market analysis. Their power lies in the ability to take multiple orders of autocorrelations into account explicitly. In the first part of the paper we discuss the framework of the…