A New Class of Stochastic Volatility Models for Pricing Options Based on Observables as Volatility Proxies
Description:
One basic assumption of the celebrated Black-Scholes-Merton PDE model for pricing derivatives is that the volatility is a constant. However, the implied volatility plot based on real data is not constant, but curved exhibiting patterns of volatility skews or smiles. Since the volatility is not observable, various stochastic volatility models have been proposed to overcome the problem of non-constant volatility. Although these methods are fairly successful in modeling volatilities, they still re…
more
Date:
December 2021
Creator:
Zhou, Jie
Partner:
UNT Libraries