SWITCHING TO NONAFFINE STOCHASTIC VOLATILITY: A CLOSED-FORM EXPANSION FOR THE INVERSE GAMMA MODEL

Gamma expansion of the Heston stochastic volatility model

We derive an explicit representation of the transitions of the Heston stochastic volatility model and use it for fast and accurate simulation of the model. Of particular interest is the integral of the variance process over an interval, conditional on the level of the variance at the endpoints. We give an explicit representation of this quantity in terms of infinite sums and mixtures of gamma r...

Time delay model for the stochastic volatility with regime switching

A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options

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Bayesian Analysis of a Markov Switching Stochastic Volatility Model

This article analyzes a Markov switching stochastic volatility (MSSV) model to accommodate the shift in the mean of log-volatility. Since it is difficult to estimate the parameters in this model based on the maximum likelihood method, a Bayesian Markov-chain Monte Carlo (MCMC) approach is adopted. A particle filter for the MSSV model, which is used for model comparison and diagnostics, is const...

Price expansion formulas for model combining local and stochastic volatility

This paper consists in introducing an option price expansion for model combining local and stochastic volatility with tight error estimates. The local volatility part is considered as general but has to satisfy some growth and boundedness assumptions. For the stochastic part, we choose a square root process, which is usually used for modelling the behaviour of the variance process. In the parti...