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

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

2007-08-15

arxiv.org/abs/0708.2020v2

Economy

Quantitative Finance

Pricing of Securities

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.

Affiliated with

Also associated with

No associations

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

Comments { 0 }

Profile ID: LFWR-SCP-O-380676