Contributor Fouque, Jean-Pierre.
Papanicolaou, George. Sircar, Ronnie. Contents Introduction-- 1. The Black-Scholes theory of derivative pricing-- 2. Introduction to stochastic volatility models-- 3.
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Volatility time scales-- 4. First order perturbation theory-- 5. Implied volatility formulas and calibration-- 6. Application to exotic derivatives-- 7.
Application to American derivatives-- 8. Hedging strategies-- 9. Extensions-- Around the Heston model-- Other applications-- Interest rate models-- Credit risk I: structural models with stochastic volatility-- Credit risk II: multiscale intensity-based models-- Epilogue-- Bibliography-- Index.
They present and analyze multiscale stochastic volatility models and asymptotic approximations. These can be used in equity markets, for instance, to link the prices of path-dependent exotic instruments to market implied volatilities. The methods are also used for interest rate and credit derivatives.
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Other applications considered include variance-reduction techniques, portfolio optimization, forward-looking estimation of CAPM 'beta', and the Heston model and generalizations of it. Ji-Hun Yoon 6 Estimated H-index: 6. Estimated H-index: 1. Request Full-text. View in Source. Stochastic volatility of underlying assets has been shown to affect significantly the price of many financial derivatives.
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In particular, a fast mean-reverting factor of the stochastic volatility plays a major role in the pricing of options. This paper deals with the interest rate model dependence of the stochastic volatility impact on defaultable interest rate derivatives. We obtain an asymptotic formula of the price of defaultable bonds and bond options based on a quadratic term structure model and investigate the stochastic volatility and default risk effects and compare the results with those of the Vasicek model. References 20 Citations 0 Cite.
Multiscale Stochastic Volatility for Equity, Interest Rate, and Credit Derivatives: Index
References Option pricing under hybrid stochastic and local volatility. Published on Aug 1, in Quantitative Finance 1. Sun Yong Choi 3 Estimated H-index: 3. Estimated H-index: This paper proposes a new option pricing model which can be thought of as a hybrid stochastic volatility and local volatility model.
This model is built on the local volatility of the constant elasticity of variance CEV model multiplied by stochastic volatility which is driven by a fast mean-reverting Ornstein-Uhlenbeck process. The formal asymptotic approximations for option prices are studied to extend the existing CEV pricing formula. From the results, we show that our model improves the do Published on Sep 1, in Journal of Econometrics 1.
Don Kim 12 Estimated H-index: We explore whether several families of dynamic term structure models that enforce a zero lower bound on short rates imply conditional distributions of Japanese bond yields consistent with these patterns. Interest Rate Models. Published on Jan 1, in Journal of Mathematical Finance. Alex Paseka 3 Estimated H-index: 3. Estimated H-index: 4. In this paper, we review recent developments in modeling term structures of market yields on default-free bonds. Our discussion is restricted to continuous-time dynamic term structure models DTSMs.
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- Multiscale stochastic volatility for equity, interest rate, and credit derivatives.
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We derive joint conditional moment generating functions CMGFs of state variables for DTSMs in which state variables follow multivariate affine diffusions and jump-diffusion processes with random intensity. As an illustration of the pricing methods, we provide special cases of the general formulati Default risk in interest rate derivatives with stochastic volatility.
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Published on Dec 1, in Quantitative Finance 1. Bomi Kim 1 Estimated H-index: 1. In this study, we consider short interest rate models of the Vascicek type with stochastic volatility and obtain formulas for default risk in interest rate derivatives. Corrections from a fast mean-reverting stochastic volatility are computed to show how they can affect the term structure of the interest rate derivatives. Our results for the defaultable bonds as well as the corresponding bond options are obtained as an extension of the non-defaultable case studied by Cotton et al.
Multiscale stochastic volatility for equity, interest rate, and credit derivatives. Published on Jan 1, Jean-Pierre Fouque 26 Estimated H-index: Introduction 1. The Black-Scholes theory of derivative pricing 2.