Stochastic Volatility with an Ornstein-Uhlenbeck Process : An Extension

In this paper, we reexamine and extend the stochastic volatility model of Stein and Stein (1991) where volatility follows a mean-reversion Ornstein-Uhlenbeck process. Using Fourier inversion techniques we are able to allow for correlation between instantaneous volatilities and the underlying stock returns. A closed-form pricing solution for European options is derived and some numerical examples are given

Year of publication:	[1998]
Authors:	Schöbel, Rainer
Other Persons:	Zhu, Jianwei (contributor)
Publisher:	[1998]: [S.l.] : SSRN

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