Parameter Sensitivity Analysis of the He-ston Stochastic Volatility Model

On the Pricing of American Options under Stochastic Local Volatility and Stochastic Correlation via the RBSDE Framework

In this work, we study the pricing of American options under stochastic local volatility (SLV) models extended by including stochastic correlation driven by an additional stochastic process. We generalize the class of SLV models by incorporating a flexible stochastic correlation structure. To price options within these...

Asian Option Pricing Under a Two-Factor Stochastic Volatility with a Stochastic Long-Term Mean

This paper studies the valuation of continuously monitored geometric Asian options under a two-factor stochastic volatility model with stochastic long-term variance levels. We derive the joint characteristic function required for continuous geometric averaging and obtain analytical pricing formulas for fixed-strike cal...

How to Start a Stochastic Volatility Process

The standard approach to using a stochastic volatility (SV) model for valuation of a derivative is to assume one deterministic level of volatility at time zero and define how volatility evolves over time as a random process. If this process is continuous, after a short time the stochastic volatility will still be quite...

Option Pricing under Deterministically Time-Varying Volatility: A Practical Analytical Approximation to the Black-Scholes Framework

: This study expands the Black – Scholes option pricing model by assuming volatility is deterministically evolving over time. The traditional formulation assumes constant volatility, which is inconsistent with empirical studies showing predictable changes during periods of market uncertainty (e.g., macro announcements,...

Implied Probability Measures of Volatility ∗

Stochastic Knothe-Rosenblatt: Light-speed Calibration of Stochastic Local Volatility Models

European option smiles determine the risk-neutral marginal laws of an asset, but not their intertemporal coupling, which is decisive for many applications. The Bass martingale construction selects, among all calibrated martingales, the one closest to Bachelier dynamics; it permits fast calibration at discrete maturitie...