Time-Changed Fast Mean-Reverting Stochastic Volatility Models

Details Time-Changed Fast Mean-Reverting Stochastic Volatility Models Time-Changed Fast Mean-Reverting Stochastic Volatility Models

2010-10-25

arxiv.org/abs/1010.5203v2

Economy

Quantitative Finance

Pricing of Securities

Scientific paper

We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting. Three examples of random time-changes are provided and the implied volatility surfaces induced by these time-changes are examined as a function of the model parameters. Three key features of our framework are that we are able to incorporate jumps into the price process of the underlying asset, allow for the leverage effect, and accommodate multiple factors of volatility, which operate on different time-scales.

Affiliated with

Also associated with

No associations

Rating

Time-Changed Fast Mean-Reverting 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 Time-Changed Fast Mean-Reverting Stochastic Volatility Models, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Time-Changed Fast Mean-Reverting Stochastic Volatility Models will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-94507