Moment Explosions and Long-Term Behavior of Affine Stochastic Volatility Models

Economy – Quantitative Finance – Pricing of Securities

Scientific paper

Rate now

  [ 0.00 ] – not rated yet Voters 0   Comments 0

Details

minor revision

Scientific paper

We consider a class of asset pricing models, where the risk-neutral joint process of log-price and its stochastic variance is an affine process in the sense of Duffie, Filipovic and Schachermayer [2003]. First we obtain conditions for the price process to be conservative and a martingale. Then we present some results on the long-term behavior of the model, including an expression for the invariant distribution of the stochastic variance process. We study moment explosions of the price process, and provide explicit expressions for the time at which a moment of given order becomes infinite. We discuss applications of these results, in particular to the asymptotics of the implied volatility smile, and conclude with some calculations for the Heston model, a model of Bates and the Barndorff-Nielsen-Shephard model.

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

Moment Explosions and Long-Term Behavior of Affine Stochastic Volatility Models 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 Moment Explosions and Long-Term Behavior of Affine Stochastic Volatility Models, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Moment Explosions and Long-Term Behavior of Affine Stochastic Volatility Models will most certainly appreciate the feedback.

Rate now

     

Profile ID: LFWR-SCP-O-676742

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