scholarly journals Option pricing in a regime switching stochastic volatility model

2018 ◽  
Vol 138 ◽  
pp. 116-126 ◽  
Author(s):  
Arunangshu Biswas ◽  
Anindya Goswami ◽  
Ludger Overbeck
Keyword(s):  
Option Pricing ◽  
Stochastic Volatility ◽  
Regime Switching ◽  
Stochastic Volatility Model ◽  
Volatility Model

Option pricing under the fractional stochastic volatility model

2021 ◽  
Vol 63 ◽  
pp. 123-142
Author(s):  
Yuecai Han ◽  
Zheng Li ◽  
Chunyang Liu
Keyword(s):  
Brownian Motion ◽  
Option Pricing ◽  
Fractional Brownian Motion ◽  
Stochastic Volatility ◽  
Option Price ◽  
Stochastic Volatility Model ◽  
Option Prices ◽  
European Call Option ◽  
Volatility Model ◽  
The Impact

We investigate the European call option pricing problem under the fractional stochastic volatility model. The stochastic volatility model is driven by both fractional Brownian motion and standard Brownian motion. We obtain an analytical solution of the European option price via the Itô’s formula for fractional Brownian motion, Malliavin calculus, derivative replication and the fundamental solution method. Some numerical simulations are given to illustrate the impact of parameters on option prices, and the results of comparison with other models are presented. doi:10.1017/S1446181121000225

GENERALIZED BN–S STOCHASTIC VOLATILITY MODEL FOR OPTION PRICING

2016 ◽  
Vol 19 (02) ◽  
pp. 1650014 ◽  
Author(s):  
INDRANIL SENGUPTA
Keyword(s):  
Option Pricing ◽  
Stochastic Volatility ◽  
Gaussian Distribution ◽  
Implied Volatility ◽  
Stochastic Volatility Model ◽  
Inverse Gaussian ◽  
Martingale Measures ◽  
Structure Preserving ◽  
Volatility Model ◽  
Equivalent Martingale

In this paper, a class of generalized Barndorff-Nielsen and Shephard (BN–S) models is investigated from the viewpoint of derivative asset analysis. Incompleteness of this type of markets is studied in terms of equivalent martingale measures (EMM). Variance process is studied in details for the case of Inverse-Gaussian distribution. Various structure preserving subclasses of EMMs are derived. The model is then effectively used for pricing European style options and fitting implied volatility smiles.

scholarly journals A Stochastic Volatility Model With Realized Measures for Option Pricing

2019 ◽  
Vol 38 (4) ◽  
pp. 856-871 ◽  
Author(s):  
Giacomo Bormetti ◽  
Roberto Casarin ◽  
Fulvio Corsi ◽  
Giulia Livieri
Keyword(s):  
Option Pricing ◽  
Stochastic Volatility ◽  
Stochastic Volatility Model ◽  
Volatility Model

scholarly journals VARIANCE AND VOLATILITY SWAPS UNDER A TWO-FACTOR STOCHASTIC VOLATILITY MODEL WITH REGIME SWITCHING

2019 ◽  
Vol 22 (04) ◽  
pp. 1950009
Author(s):  
XIN-JIANG HE ◽  
SONG-PING ZHU
Keyword(s):  
Markov Chain ◽  
Characteristic Function ◽  
Stochastic Volatility ◽  
Regime Switching ◽  
Numerical Experiments ◽  
Stochastic Volatility Model ◽  
Heston Model ◽  
Volatility Model ◽  
Significant Difference ◽  
Cir Process

In this paper, the pricing problem of variance and volatility swaps is discussed under a two-factor stochastic volatility model. This model can be treated as a two-factor Heston model with one factor following the CIR process and another characterized by a Markov chain, with the motivation originating from the popularity of the Heston model and the strong evidence of the existence of regime switching in real markets. Based on the derived forward characteristic function of the underlying price, analytical pricing formulae for variance and volatility swaps are presented, and numerical experiments are also conducted to compare swap prices calculated through our formulae and those obtained under the Heston model to show whether the introduction of the regime switching factor would lead to any significant difference.

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