Stochastic Volatility
نویسنده
چکیده
The volatility of a nancial asset is the variance per unit time of the logarithm of the price of the asset. Volatility has a key role to play in the determination of risk and in the valuation of options and other derivative securities. The widespread Black-Scholes model for asset prices assumes constant volatility. The purpose of this chapter is to review the evidence for non-constant volatility and to consider the implications for option pricing of alternative random or stochastic volatility models. We concentrate on continuous time diiusion models for the volatility, but we also make comments about certain classes of discrete time models, such as ARV, ARCH and GARCH.
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