Heston stochastic vol-of-vol model for joint calibration of VIX and S\&P 500 options
From MaRDI portal
Publication:4554477
Abstract: A parsimonious generalization of the Heston model is proposed where the volatility-of-volatility is assumed to be stochastic. We follow the perturbation technique of Fouque et al (2011, CUP) to derive a first order approximation of the price of options on a stock and its volatility index. This approximation is given by Heston's quasi-closed formula and some of its Greeks. It can be very efficiently calculated since it requires to compute only Fourier integrals and the solution of simple ODE systems. We exemplify the calibration of the model with S&P 500 and VIX data.
Recommendations
- Calibration of stochastic volatility models via second-order approximation: the Heston case
- Full and fast calibration of the Heston stochastic volatility model
- On calibration of stochastic and fractional stochastic volatility models
- A regime-switching Heston model for VIX and S&P 500 implied volatilities
- Stochastic volatility models and the pricing of VIX options
Cites work
- A closed-form solution for options with stochastic volatility with applications to bond and currency options
- A consistent pricing model for index options and volatility derivatives
- A fast mean-reverting correction to Heston's stochastic volatility model
- A regime-switching Heston model for VIX and S&P 500 implied volatilities
- Consistent modelling of VIX and equity derivatives using a \(3/2\) plus jumps model
- Linking Vanillas and VIX Options: A Constrained Martingale Optimal Transport Problem
- Maturity cycles in implied volatility
- Multiscale stochastic volatility for equity, interest rate, and credit derivatives.
- Multiscale stochastic volatility model for derivatives on futures
- Second order multiscale stochastic volatility asymptotics: stochastic terminal layer analysis and calibration
- The shape and term structure of the index option smirk: why multifactor stochastic volatility models work so well
- Time dependent Heston model
Cited in
(35)- Regime-switching stochastic volatility model: estimation and calibration to VIX options
- Tempered stable processes with time-varying exponential tails
- Rejoinder to a remark on Lin and Chang's paper `Consistent modeling of S\&P 500 and VIX derivatives'
- The correction of multiscale stochastic volatility to American put option: an asymptotic approximation and finite difference approach
- Stationary Heston model: calibration and pricing of exotics using product recursive quantization
- On smile properties of volatility derivatives: understanding the VIX skew
- Determining a stable relationship between hedge fund index HFRI-equity and S\&P 500 behaviour, using filtering and maximum likelihood
- Implied higher order moments in the Heston model: a case study of S\&P500 index
- Volatility is (mostly) path-dependent
- Weak approximations and VIX option price expansions in forward variance curve models
- The complete Gaussian kernel in the multi-factor Heston model: option pricing and implied volatility applications
- Heston model: the variance swap calibration
- Variance swaps under multiscale stochastic volatility of volatility
- A fast calibrating volatility model for option pricing
- A regime-switching Heston model for VIX and S&P 500 implied volatilities
- Dispersion-constrained martingale Schrödinger problems and the exact joint S\&P 500/VIX smile calibration puzzle
- Regime switching affine processes with applications to finance
- On calibration of stochastic and fractional stochastic volatility models
- Inversion of convex ordering in the VIX market
- A scaled version of the double-mean-reverting model for VIX derivatives
- Closed-form pricing formulas for variance swaps in the Heston model with stochastic long-run mean of variance
- Pricing variance swaps under subordinated Jacobi stochastic volatility models
- The rough Hawkes Heston stochastic volatility model
- Time dependent Heston model
- MARKOVIAN STOCHASTIC VOLATILITY WITH STOCHASTIC CORRELATION — JOINT CALIBRATION AND CONSISTENCY OF SPX/VIX SHORT-MATURITY SMILES
- Pricing options under simultaneous stochastic volatility and jumps: a simple closed-form formula without numerical/computational methods
- Joint calibration to SPX and VIX options with signature-based models
- The VIX Future in Bergomi Models: Fast Approximation Formulas and Joint Calibration with S&P 500 Skew
- Calibration of stochastic volatility models via second-order approximation: the Heston case
- Methodology for stochastic volatility process calibration application to the CAC 40 index
- Joint modeling and calibration of SPX and VIX by optimal transport
- Option pricing under the jump diffusion and multifactor stochastic processes
- Smiles \& smirks: volatility and leverage by jumps
- Consistent time‐homogeneous modeling of SPX and VIX derivatives
- A general framework for a joint calibration of VIX and VXX options
This page was built for publication: Heston stochastic vol-of-vol model for joint calibration of VIX and S\&P 500 options
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4554477)
