A comparison between several correlated stochastic volatility models

Details A comparison between several correlated stochastic volatility models A comparison between several correlated stochastic volatility models

2003-12-04

arxiv.org/abs/cond-mat/0312121v1

Physica A 344 (2004) 134-137

Physics

Condensed Matter

Statistical Mechanics

4 pages, 2 figures, APFA 4 conferences contribution (13-15 november, 2003, Warsaw)

Scientific paper

10.1016/j.physa.2004.06.103

We compare the most common SV models such as the Ornstein-Uhlenbeck (OU), the Heston and the exponential OU (expOU) models. We try to decide which is the most appropriate one by studying their volatility autocorrelation and leverage effect, and thus outline the limitations of each model. We add empirical research on market indices confirming the universality of the leverage and volatility correlations.

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