Stochastic volatility models have revolutionised the field of option pricing by allowing the volatility of an asset to vary randomly over time rather than remain constant. These models have ...

Discover the Heston Model, a stochastic volatility model for European options pricing. Learn how it differs from ...

The traditional approach to stochastic volatility (SV) modelling begins with the specification of an SV process, typically on the grounds of its analytical tractability (see, for example, Heston, 1993 ...

We study Ornstein-Uhlenbeck stochastic processes driven by Lévy processes, and extend them to more general non-Ornstein-Uhlenbeck models. In particular, we investigate the means of making the ...

Deep learning is increasingly used in financial modeling, but its lack of transparency raises risks. Using the well-known Heston option pricing model as a benchmark, researchers show that global ...

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A stochastic volatility model where volatility was driven solely by a latent variable called news was estimated for three stock indices. A Markov chain Monte Carlo algorithm was used for estimating ...

Unspanned stochastic volatility (USV) refers to the inability of bonds to replicate volatility-sensitive derivative securities. Affine term structure models require special restrictions on the ...

We highlight a state variable misspecification with one accepted method to implement stochastic volatility (SV) in DSGE models when transforming the nonlinear state-innovation dynamics to its linear ...