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A Multifactor Volatility Heston Model

[Zeitschriftenartikel]

Grasselli, Martino; Da Fonseca, Jose; Tebaldi, Claudio

Zitationshinweis

Bitte beziehen Sie sich beim Zitieren dieses Dokumentes immer auf folgenden Persistent Identifier (PID):http://nbn-resolving.de/urn:nbn:de:0168-ssoar-221122

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Abstract We consider a model for a single risky asset whose volatility follows a multifactor (matrix)Wishart affine process, recently introduced in finance by Gourieroux and Sufana (2004). As in standard Duffie and Kan (1996) affine models the pricing problem can be solved through the Fast Fourier Transform of Carr and Madan (1999). A numerical illustration shows that this specification provides a separate fit of the long term and short term implied volatility surface and, differently from previous diffusive stochastic volatility models, it is possible to identify a specific factor accounting for a stochastic leverage effect, a well known stylized fact of FX option markets analyzed in Carr and Wu (2004).
Klassifikation Allgemeines, spezielle Theorien und "Schulen", Methoden, Entwicklung und Geschichte der Wirtschaftswissenschaften; Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Methode Theorieanwendung
Freie Schlagwörter Stochastic volatility; Financial derivatives; Volatility modelling; Options pricing; Options volatility
Publikationsjahr 2008
Seitenangabe S. 591-604
Zeitschriftentitel Quantitative Finance, 8 (2008) 6
DOI http://dx.doi.org/10.1080/14697680701668418
Status Postprint; begutachtet (peer reviewed)
Lizenz PEER Licence Agreement (applicable only to documents from PEER project)
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