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Rough-Heston Local-Volatility Model [PDF]
International Journal of Theoretical and Applied Finance, 2022 In industrial applications it is quite common to use stochastic-volatility models driven by semi-martingale Markov volatility processes. However, in order to fit exactly market volatilities, these models are usually extended by adding a local-volatility term.
Enrico Dall'Acqua +2 more
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Risks, 2020 Deep learning for option pricing has emerged as a novel methodology for fast computations with applications in calibration and computation of Greeks. However, many of these approaches do not enforce any no-arbitrage conditions, and the subsequent local ...
Marc Chataigner +2 more
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Distribution Approach to Local Volatility for European Options in the Merton Model with Stochastic Interest Rates [PDF]
EntropyThe Dupire formula is a very useful tool for pricing financial derivatives. This paper is dedicated to deriving the aforementioned formula for the European call option in the space of distributions by applying a mathematically rigorous approach developed
Piotr Nowak, Dariusz Gatarek
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Stochastic Local Volatility [PDF]
SSRN Electronic Journal, 2008 There are two unique volatility surfaces associated with any arbitrage-free set of standard European option prices, the implied volatility surface and the local volatility surface. Several papers have discussed the stochastic differential equations for implied volatilities that are consistent with these option prices but the static and dynamic no ...
Carol Alexander, Leonardo M. Nogueira
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Forward implied volatility expansion in time-dependent local volatility models****** [PDF]
ESAIM: Proceedings and Surveys, 2014 We introduce an analytical approximation to efficiently price forward start options on equity in time-dependent local volatility models as the forward start date, the maturity or the volatility coefficient are small.
Bompis Romain, Hok Julien
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Robust and Fast Bass Local Volatility [PDF]
The Bass Local Volatility Model (Bass-LV), as studied in [Conze and Henry-Labordere, 2021], stands out for its ability to eliminate the need for interpolation between maturities. This offers a significant advantage over traditional LV models. However, its performance highly depends on accurate construction of state price densities and the corresponding
Hao Qin +3 more
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Local volatility under rough volatility
Mathematical Finance, 2023 AbstractSeveral asymptotic results for the implied volatility generated by a rough volatility model have been obtained in recent years (notably in the small‐maturity regime), providing a better understanding of the shapes of the volatility surface induced by rough volatility models, supporting their calibration power to SP500 option data.
Florian Bourgey +3 more
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Localized Realized Volatility Modelling [PDF]
SSRN Electronic Journal, 2009 With the recent availability of high-frequency financial data the long range dependence of volatility regained researchers' interest and has lead to the consideration of long memory models for realized volatility. The long range diagnosis of volatility, however, is usually stated for long sample periods, while for small sample sizes, such as e.g.
Chen, Y., Härdle, W.K., Pigorsch, U.
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Reconstructing the Local Volatility Surface from Market Option Prices
Mathematics, 2022 We present an efficient and accurate computational algorithm for reconstructing a local volatility surface from given market option prices. The local volatility surface is dependent on the values of both the time and underlying asset.
Soobin Kwak +5 more
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Daily nonparametric ARCH(1) model estimation using intraday high frequency data
AIMS Mathematics, 2021 In this paper, the intraday high-frequency data are used to estimate the volatility function of daily nonparametric ARCH(1) model. A nonparametric volatility proxy model is proposed to achieve this objective.
Xin Liang +3 more
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