A delayed stochastic volatility correction to the constant elasticity of variance model

2016 ◽  
Vol 32 (3) ◽  
pp. 611-622
Author(s):  
Min-Ku Lee ◽  
Jeong-Hoon Kim
Keyword(s):  
Stochastic Volatility ◽  
Variance Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance

scholarly journals Turbo Warrants under Hybrid Stochastic and Local Volatility

2014 ◽  
Vol 2014 ◽  
pp. 1-10 ◽  
Author(s):  
Min-Ku Lee ◽  
Ji-Hun Yoon ◽  
Jeong-Hoon Kim ◽  
Sun-Hwa Cho
Keyword(s):  
Stochastic Volatility ◽  
Uhlenbeck Process ◽  
Variance Model ◽  
Constant Elasticity ◽  
Local Volatility ◽  
Constant Elasticity Of Variance ◽  
Local Volatility Model ◽  
Volatility Model ◽  
Ornstein Uhlenbeck Process ◽  
Sensitive Structure

This paper considers the pricing of turbo warrants under a hybrid stochastic and local volatility model. The model consists of the constant elasticity of variance model incorporated by a fast fluctuating Ornstein-Uhlenbeck process for stochastic volatility. The sensitive structure of the turbo warrant price is revealed by asymptotic analysis and numerical computation based on the observation that the elasticity of variance controls leverage effects and plays an important role in characterizing various phases of volatile markets.

THE PRICING OF EUROPEAN OPTIONS UNDER THE CONSTANT ELASTICITY OF VARIANCE WITH STOCHASTIC VOLATILITY

2013 ◽  
Vol 12 (01) ◽  
pp. 1350004 ◽  
Author(s):  
BOUNGHUN BOCK ◽  
SUN-YONG CHOI ◽  
JEONG-HOON KIM
Keyword(s):  
Numerical Experiment ◽  
Stochastic Volatility ◽  
Hybrid Model ◽  
Multiscale Analysis ◽  
Asset Price ◽  
European Options ◽  
Barrier Option ◽  
Price Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance

This paper considers a hybrid risky asset price model given by a constant elasticity of variance multiplied by a stochastic volatility factor. A multiscale analysis leads to an asymptotic pricing formula for both European vanilla option and a Barrier option near the zero elasticity of variance. The accuracy of the approximation is provided in a rigorous manner. A numerical experiment for implied volatilities shows that the hybrid model improves some of the well-known models in view of fitting the data for different maturities.

Pricing American Options under the Constant Elasticity of Variance Model and Subject to Bankruptcy

2009 ◽  
Vol 44 (5) ◽  
pp. 1231-1263 ◽  
Author(s):  
João Pedro Vidal Nunes
Keyword(s):  
American Options ◽  
Asymptotic Properties ◽  
Variance Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Early Exercise ◽  
Exercise Boundary ◽  
And Diffusion

AbstractThis paper proposes an alternative characterization of the early exercise premium that is valid for any Markovian and diffusion underlying price process as well as for any parameterization of the exercise boundary. This new representation is shown to provide the best pricing alternative available in the literature for medium- and long-term American option contracts, under the constant elasticity of variance model. Moreover, the proposed pricing methodology is also extended easily to the valuation of American options on defaultable equity and possesses appropriate asymptotic properties.

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