Option pricing when correlations are stochastic: an analytical framework

DOI10.1007/S11147-008-9018-XzbMATH Open1174.91006OpenAlexW3012274919MaRDI QIDQ2425554FDOQ2425554

Authors: José Da Fonseca, Martino Grasselli, C. Tebaldi 

Publication date: 6 May 2008

Published in: Review of Derivatives Research (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1007/s11147-008-9018-x

Recommendations

• WORST-OF OPTIONS AND CORRELATION SKEW UNDER A STOCHASTIC CORRELATION FRAMEWORK
• Option pricing and implied volatilities in a 2-hypergeometric stochastic volatility model
• Stochastic correlation and volatility mean-reversion -- empirical motivation and derivatives pricing via perturbation theory
• On the Heston model with stochastic correlation
• Quanto pricing in stochastic correlation models

zbMATH Keywords

Wishart processesstochastic correlationbest-of basket option

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20)

Cites Work

• Two singular diffusion problems
• A closed-form solution for options with stochastic volatility with applications to bond and currency options
• A YIELD‐FACTOR MODEL OF INTEREST RATES
• Affine processes and applications in finance
• Transform Analysis and Asset Pricing for Affine Jump-diffusions
• Title not available (Why is that?)
• Wishart processes
• SOLVABLE AFFINE TERM STRUCTURE MODELS
• Derivative pricing with Wishart multivariate stochastic volatility
• Discrete time Wishart term structure models
• Estimating the Wishart affine stochastic correlation model using the empirical characteristic function

Cited In (84)

• The Laplace transform of the integrated Volterra Wishart process
• The multivariate mixture dynamics model: shifted dynamics and correlation skew
• Modelling stochastic skew of FX options using SLV models with stochastic spot/vol correlation and correlated jumps
• Solving High-Dimensional Optimal Stopping Problems Using Optimization Based Model Order Reduction
• On pricing contingent claims under the double Heston model
• Digital option pricing based on copulas with stochastic simulation
• European options sensitivity with respect to the correlation for multidimensional Heston models
• Infinite-dimensional Wishart processes
• Efficient pricing and calibration of high-dimensional basket options
• A stochastic volatility factor model of Heston type. Statistical properties and estimation
• Partial differential equation pricing of contingent claims under stochastic correlation
• Pricing exchange options under hybrid stochastic volatility and interest rate models
• Pricing of covered warrants on correlation between stock returns and volatility
• Asset prices with investor protection and past information
• Pricing multi-asset American option under Heston-CIR diffusion model with jumps
• A general framework for a joint calibration of VIX and VXX options
• Forward starting options pricing under a regime-switching jump-diffusion model with Wishart stochastic volatility and stochastic interest rate
• Pricing digital outperformance options with uncertain correlation
• Order estimates for the exact Lugannani-Rice expansion
• Mean-variance asset-liability management with asset correlation risk and insurance liabilities
• Calibration and advanced simulation schemes for the Wishart stochastic volatility model
• Long-term optimal investment in matrix valued factor models
• The explicit Laplace transform for the Wishart process
• The role of the dependence between mortality and interest rates when pricing guaranteed annuity options
• Fractional Wishart processes and \(\varepsilon\)-fractional Wishart processes with applications
• European rainbow option values under the two-asset Merton jump-diffusion model
• A note on the Dai-Singleton canonical representation of affine term structure models
• A closed-form solution for outperformance options with stochastic correlation and stochastic volatility
• Long-time large deviations for the multiasset Wishart stochastic volatility model and option pricing
• Affine processes on positive semidefinite matrices
• Pricing two-asset barrier options under stochastic correlation via perturbation
• Option pricing and perfect hedging on correlated stocks
• Optimal portfolios when variances and covariances can jump
• Marginal consistent dependence modelling using weak subordination for Brownian motions
• Ergodicity of affine processes on the cone of symmetric positive semidefinite matrices
• Risk-sensitive asset management in a Wishart-autoregressive factor model with jumps
• WORST-OF OPTIONS AND CORRELATION SKEW UNDER A STOCHASTIC CORRELATION FRAMEWORK
• On strong solutions for positive definite jump diffusions
• Discrete time Wishart term structure models
• Is the information obtained from European options on equally weighted baskets enough to determine the prices of exotic derivatives such as worst-of options?
• Commodity derivatives pricing with cointegration and stochastic covariances
• A new class of multidimensional Wishart-based hybrid models
• Multivariate FX models with jumps: triangles, quantos and implied correlation
• On moment non-explosions for Wishart-based stochastic volatility models
• Maximum likelihood estimation for Wishart processes
• Multivariate COGARCH(1, 1) processes
• A stochastic correlation model with mean reversion for pricing multi-asset options
• Explicit solutions to quadratic BSDEs and applications to utility maximization in multivariate affine stochastic volatility models
• Making the best of best-of
• The multivariate variance gamma model: basket option pricing and calibration
• Option pricing and implied volatilities in a 2-hypergeometric stochastic volatility model
• OPTION PRICING AND HEDGING WITH TEMPORAL CORRELATIONS
• A reduced PDE method for European option pricing under multi-scale, multi-factor stochastic volatility
• Pricing of spread options on stochastically correlated underlyings
• Matrix Poincaré, Φ-Sobolev inequalities, and quantum ensembles
• Price of correlations in stochastic optimization
• High-dimensional limits of eigenvalue distributions for general Wishart process
• On the application of Wishart process to the pricing of equity derivatives: the multi-asset case
• Estimating the Wishart affine stochastic correlation model using the empirical characteristic function
• Stochastic correlation and volatility mean-reversion -- empirical motivation and derivatives pricing via perturbation theory
• Riding on the smiles
• Optimal investment under multi-factor stochastic volatility
• Pricing of mountain range derivatives under a principal component stochastic volatility model
• Efficiently pricing double barrier derivatives in stochastic volatility models
• Valuation of asset and volatility derivatives using decoupled time-changed Lévy processes
• Recent advances on eigenvalues of matrix-valued stochastic processes
• Explosion time for some Laplace transforms of the Wishart process
• Basket option pricing and implied correlation in a one-factor Lévy model
• On the Relation Between Option and Stock Prices: A Convex Optimization Approach
• A PARSIMONIOUS MULTI-ASSET HESTON MODEL: CALIBRATION AND DERIVATIVE PRICING
• Analytic pricing of volatility-equity options within Wishart-based stochastic volatility models
• Hedging (co)variance risk with variance swaps
• A consistent stochastic model of the term structure of interest rates for multiple tenors
• The Wishart short rate model
• Optimal portfolios for financial markets with Wishart volatility
• Pricing range notes within Wishart affine models
• Mean-variance portfolio selection with correlation risk
• Neutral and indifference pricing with stochastic correlation and volatility
• General closed-form basket option pricing bounds
• Two asset-barrier option under stochastic volatility
• On the existence and uniqueness of the solution to the double Heston model equation and valuing lookback option
• Bond pricing under mixed generalized CIR model with mixed Wishart volatility process
• Valuing variable annuity guarantees on multiple assets
• Algorithm 963: Estimation of stochastic covariance models using a continuum of moment conditions

Uses Software

• Mathematica

This page was built for publication: Option pricing when correlations are stochastic: an analytical framework

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2425554)