alternative stochastic volatility models
On cross currency models with stochastic volatility and correlated interest rates
... Research on the Heston dynamics in combination with correlated interest rates has led to some interesting models. In [And07] and [Gie04] an indirectly imposed correlation structure between Gaussian short-rates and ...
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Revealing the arcane: an introduction to the art of stochastic volatility models
... It is well-known from the GMM literature that the best choice of the moments should be based on the score vector (the gradient of the log-likelihood function). Then GMM estimation is equiva- lent to ML estimation and is ...
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Nonparametric specification tests for stochastic volatility models based on volatility density
... Remark Another type of bootstrap, the so-called block bootstrap, could also be con- sidered in the current model. Corradi and Swanson (2005) have used the block bootstrap to approximate the null distribution in testing ...
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Bayesian Testing for Asset Volatility Persistence on Multivariate Stochastic Volatility Models
... nonnested models, formulated respectively under the null and alternative hypothesis, were ...latent volatility under each model. In SV models, the number of unknown parameters and latent ...
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THE MIXING APPROACH TO STOCHASTIC VOLATILITY AND JUMP MODELS
... various alternative theories. If there are more realistic models for the stock price than GBM, then efficient option markets should clearly incorporate them into valuations, at least to the extent that ...
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Testing for one factor models versus stochastic volatility models
... The suggested test statistics are based on the difference between a kernel estimator of the instantaneous variance, averaged over the sample realization on a fixed time span, and realized volatility. The intuition ...
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Accelerating the calibration of stochastic volatility models
... An alternative solution is described in Kahl and J¨ackel ...some models this problem can be solved by using an appropriate representation of the characteristic ...
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Frequentist and Bayesian Unit Root Tests in Stochastic Volatility Models
... Kalman filter. They replace the second component, i.e. the correction factor, by its unbiased estimator. The unbiased estimate is calculated by simulation. They call the estimators obtained by numerical optimization of ...
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Nonparametric specification tests for stochastic volatility models based on volatility density
... Remark Another type of bootstrap, the so-called block bootstrap, could also be con- sidered in the current model. Corradi and Swanson (2005) have used the block bootstrap to approximate the null distribution in testing ...
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Unit Root Tests in Time Series and Stochastic Volatility Models
... We have presented an application of the IUT theory to the testing of the null hypothesis of stationarity or explosiveness in AR (1) process. This null hypothesis is viewed as the limit of a particular sequence of ...
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SVX mo del. The SVX mo del is then extended to a
... SV models. In recent years this class of volatility model has received considerable attention in the literature and it can now be regarded as a competitive alternative to GARCH models ...
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Pricing and hedging exotic options in stochastic volatility models
... a stochastic volatility context, this necessarily involves higher ...general stochastic volatility ...an alternative approach of hedging the barrier options: the main risk is ...
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Essays on stochastic volatility and random field models in finance
... rate models, instantaneous forward rate models, and LIBOR or market ...rate models were the first to be studied (Merton, 1973; Vasicek, 1977; Cox, Ingersoll, and Ross, ...rate models were ...
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Statistical modelling of financial crashes: Rapid growth, illusion of certainty and contagion
... expectations models were introduced with the work of Blanchard and Watson to account for the possibility that prices may deviate from fundamental levels ...underlying volatility fluctuations which typically ...
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Vanilla Option Pricing on Stochastic Volatility market models
... Abstract We want to discuss the option pricing on stochastic volatility market models, in which we are going to consider a generic function βνt for the drift of volatility process.. It [r] ...
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Geometrical Approximation method and stochastic volatility market models
... 3 Numerical methods for Option Valuation For the Heston model we are able to compute the solution by numerical techniques, as: • Finite Difference method Crank Nicolson; • Monte-Carlo si[r] ...
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Pricing and Hedging in Stochastic Volatility Regime Switching Models
... our stochastic volatility model describes the price of a commodity produced by the firm A , then the Markov process X can represent the credit rating of this firm given by exogenous rating company as ...
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Bayesian Estimation of Non Gaussian Stochastic Volatility Models
... [4] fitted a student-t-distribution and a Generalized Error Distribution (GED) as well as a normal distribution to the error distribution in the SV model by using the simulated maximum likelihood method developed by ...
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Embedding Stochastic Correlation into the Pricing of FX Quanto Options under Stochastic Volatility Models
... a stochastic correlation structure into the pricing of FX quanto options where both the dynamics for the underlying asset and for the exchange rate are given by a stochastic volatility ...a ...
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Estimating and testing stochastic volatility models using realized measures
... As one can notice from (12), a test for the correct specification of mean, variance and covariance structure of integrated volatility can be performed without knowledge of the leverage parameter ρ and/or the ...
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