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

DOI10.1093/RFS/6.2.327zbMath1384.35131OpenAlexW2064978316WikidataQ57253923 ScholiaQ57253923MaRDI QIDQ5374080

Steven L. Heston

Publication date: 6 April 2018

Published in: Review of Financial Studies (Search for Journal in Brave)

Full work available at URL: https://semanticscholar.org/paper/d5b9b0ac52fd359eb2ce892b94ea7e8b20cb3b8d

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91)

Related Items (only showing first 100 items - show all)

The \(\alpha\)-hypergeometric stochastic volatility model ⋮ Linear trend exclusion for models defined with stochastic differential and difference equations ⋮ Optimal strategies for asset allocation and consumption under stochastic volatility ⋮ A general multidimensional Monte Carlo approach for dynamic hedging under stochastic volatility ⋮ A generic decomposition formula for pricing vanilla options under stochastic volatility models ⋮ Pricing FX options in the Heston/CIR jump-diffusion model with log-normal and log-uniform jump amplitudes ⋮ Saddlepoint approximations for continuous-time Markov processes ⋮ Inference with non-Gaussian Ornstein-Uhlenbeck processes for stochastic volatility ⋮ Econometric specification of stochastic discount factor models ⋮ SABR/LIBOR market models: pricing and calibration for some interest rate derivatives ⋮ Deformed exponentials and applications to finance ⋮ Robust option pricing: Hannan and Blackwell meet Black and Scholes ⋮ Robust optimal portfolio and proportional reinsurance for an insurer under a CEV model ⋮ Smoothing and parametric rules for stochastic mean-CVaR optimal execution strategy ⋮ Optimal restricted quadratic estimator of integrated volatility ⋮ Volatility puzzles: a simple framework for gauging return-volatility regressions ⋮ Impact of jumps on returns and realised variances: econometric analysis of time-deformed Lévy processes ⋮ Option valuation with conditional skewness ⋮ Multivariate Jacobi process with application to smooth transitions ⋮ On a transform method for the efficient computation of conditional V\@R (and V\@R) with application to loss models with jumps and stochastic volatility ⋮ Testing for jumps when asset prices are observed with noise -- a ``swap variance approach ⋮ A Gaussian approximation scheme for computation of option prices in stochastic volatility models ⋮ Positive finite difference schemes for a partial integro-differential option pricing model ⋮ Quality control for structural credit risk models ⋮ Out of sample forecasts of quadratic variation ⋮ Estimating quadratic variation consistently in the presence of endogenous and diurnal measurement error ⋮ A hybrid stock trading system using genetic network programming and mean conditional value-at-risk ⋮ Determining and benchmarking risk neutral distributions implied from option prices ⋮ Estimating integrated co-volatility with partially miss-ordered high frequency data ⋮ Second order multiscale stochastic volatility asymptotics: stochastic terminal layer analysis and calibration ⋮ Valuation of power options under Heston's stochastic volatility model ⋮ Valuation of asset and volatility derivatives using decoupled time-changed Lévy processes ⋮ Is the information obtained from European options on equally weighted baskets enough to determine the prices of exotic derivatives such as worst-of options? ⋮ A comparative study on time-efficient methods to price compound options in the Heston model ⋮ A fast calibrating volatility model for option pricing ⋮ The implication of missing the optimal-exercise time of an American option ⋮ Commodity derivatives pricing with cointegration and stochastic covariances ⋮ An explicitly solvable Heston model with stochastic interest rate ⋮ Spitzer identity, Wiener-Hopf factorization and pricing of discretely monitored exotic options ⋮ Optimal switching decisions under stochastic volatility with fast mean reversion ⋮ An investigation of model risk in a market with jumps and stochastic volatility ⋮ On moment non-explosions for Wishart-based stochastic volatility models ⋮ On calibration of stochastic and fractional stochastic volatility models ⋮ On the control of the difference between two Brownian motions: an application to energy markets modeling ⋮ Maximum likelihood estimation for Wishart processes ⋮ Estimation of parameters of the Samuelson model with telegraph drift ⋮ Empirical analysis of structural change in credit default swap volatility ⋮ Strategic real options with stochastic volatility in a duopoly model ⋮ Investment timing under hybrid stochastic and local volatility ⋮ Functional limit theorems for additive and multiplicative schemes in the Cox-Ingersoll-Ross model ⋮ A multivariate stochastic unit root model with an application to derivative pricing ⋮ Consistent pricing of VIX and equity derivatives with the \(4/2\) stochastic volatility plus jumps model ⋮ Valuing inflation-linked death benefits under a stochastic volatility framework ⋮ Stochastic covariance and dimension reduction in the pricing of basket options ⋮ Pricing VIX options with stochastic volatility and random jumps ⋮ Efficient portfolio dependent on Cox-Ingersoll-Ross interest rate ⋮ The evaluation of barrier option prices under stochastic volatility ⋮ The Euler-Maruyama approximation for the asset price in the mean-reverting-theta stochastic volatility model ⋮ A new exact solution for pricing European options in a two-state regime-switching economy ⋮ Option price with stochastic volatility for both fast and slow mean-reverting regimes ⋮ Multidimensional structural credit modeling under stochastic volatility ⋮ Capturing parameter risk with convex risk measures ⋮ Mimicking an Itō process by a solution of a stochastic differential equation ⋮ An empirical comparison of two stochastic volatility models using Indian market data ⋮ Exact solutions for bond and option prices with systematic jump risk ⋮ Index-option pricing with stochastic volatility and the value of accurate variance forecasts ⋮ American stochastic volatility call option pricing: a lattice based approach ⋮ Stock index dynamics and derivatives pricing with stochastic interest rates ⋮ Calibration and hedging under jump diffusion ⋮ Catastrophe equity put options under stochastic volatility and catastrophe-dependent jumps ⋮ A fast stationary iterative method for a partial integro-differential equation in pricing options ⋮ Local volatility of volatility for the VIX market ⋮ A lattice model for option pricing under GARCH-jump processes ⋮ A Schauder approach to degenerate-parabolic partial differential equations with unbounded coefficients ⋮ Goodness-of-fit test for stochastic volatility models ⋮ Existence of financial equilibria in continuous time with potentially complete markets ⋮ The Riccati system and a diffusion-type equation ⋮ Large deviations for affine diffusion processes on \(\mathbb R_+^m \times\mathbb R^n\) ⋮ Explicit solutions to quadratic BSDEs and applications to utility maximization in multivariate affine stochastic volatility models ⋮ The costs of suboptimal dynamic asset allocation: general results and applications to interest rate risk, stock volatility risk, and growth/value tilts ⋮ Stability of central finite difference schemes for the Heston PDE ⋮ A remark on Lin and Chang's paper `consistent modeling of S\&P 500 and VIX derivatives' ⋮ Rejoinder to a remark on Lin and Chang's paper `Consistent modeling of S\&P 500 and VIX derivatives' ⋮ A boundary element method to price time-dependent double barrier options ⋮ The use of statistical tests to calibrate the Black-Scholes asset dynamics model applied to pricing options with uncertain volatility ⋮ 2-microlocal analysis of martingales and stochastic integrals ⋮ Parameter identification in financial market models with a feasible point SQP algorithm ⋮ Analytical approximation of the transition density in a local volatility model ⋮ Asymptotic expansion for pricing options for a mean-reverting asset with multiscale stochastic volatility ⋮ Ergodic approximation of the distribution of a stationary diffusion: rate of convergence ⋮ A finite element discretization method for option pricing with the Bates model ⋮ Space-time analyticity of weak solutions to linear parabolic systems with variable coefficients ⋮ Long-term and blow-up behaviors of exponential moments in multi-dimensional affine diffusions ⋮ Option pricing and hedging under a stochastic volatility Lévy process model ⋮ Filtering a nonlinear stochastic volatility model ⋮ EFFICIENT ESTIMATION USING THE CHARACTERISTIC FUNCTION ⋮ Pricing and hedging European-style options in Lévy-based stochastic volatility models considering the leverage effect ⋮ Pricing variance swaps under stochastic volatility with an Ornstein-Uhlenbeck process ⋮ Bootstrap specification tests for diffusion processes ⋮ Order estimates for the exact Lugannani-Rice expansion

This page was built for publication: A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options