Models with time-dependent parameters using transform methods: application to Heston's model

Economy – Quantitative Finance – Pricing of Securities

Scientific paper

Rate now

  [ 0.00 ] – not rated yet Voters 0   Comments 0

Details

10 pages, 10 figures, 6 tables, error corrected in sections VI and VII, references added in sections I and VI, Submitted to th

Scientific paper

This paper presents a methodology to introduce time-dependent parameters for a wide family of models preserving their analytic tractability. This family includes hybrid models with stochastic volatility, stochastic interest-rates, jumps and their non-hybrid counterparts. The methodology is applied to Heston's model. A bootstrapping algorithm is presented for calibration. A case study works out the calibration of the time-dependent parameters to the volatility surface of the Eurostoxx 50 index. The methodology is also applied to the analytic valuation of forward start vanilla options driven by Heston's model. This result is used to explore the forward skew of the case study.

No associations

LandOfFree

Say what you really think

Search LandOfFree.com for scientists and scientific papers. Rate them and share your experience with other people.

Rating

Models with time-dependent parameters using transform methods: application to Heston's model does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Models with time-dependent parameters using transform methods: application to Heston's model, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Models with time-dependent parameters using transform methods: application to Heston's model will most certainly appreciate the feedback.

Rate now

     

Profile ID: LFWR-SCP-O-380676

All data on this website is collected from public sources. Our data reflects the most accurate information available at the time of publication.