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A Multifactor Volatility Heston Model
[Zeitschriftenartikel]
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 ... mehr
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).... weniger
Klassifikation
Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Allgemeines, spezielle Theorien und "Schulen", Methoden, Entwicklung und Geschichte der Wirtschaftswissenschaften
Methode
Theorieanwendung
Freie Schlagwörter
Stochastic volatility; Financial derivatives; Volatility modelling; Options pricing; Options volatility
Sprache Dokument
Englisch
Publikationsjahr
2008
Seitenangabe
S. 591-604
Zeitschriftentitel
Quantitative Finance, 8 (2008) 6
DOI
https://doi.org/10.1080/14697680701668418
Status
Postprint; begutachtet (peer reviewed)
Lizenz
PEER Licence Agreement (applicable only to documents from PEER project)