This paper evaluates the prices of European-style options when dynamics of the underlying asset is assumed to follow a Markov-switching Heston's stochastic volatility model. Under this framework, the expected return and the long-term mean of the variance of the underlying asset rely on states of...

This paper compares the goodness-of-fit of eight option-based approaches used to extract risk-neutral probability density functions from a high-frequency CAC 40 index options during a normal and troubled period. Our findings show that the kernel estimator generates a strong volatility smile with...

This paper considers an optimal investment and excess-of-loss reinsurance problem with delay for an insurer under Heston’s stochastic volatility (SV) model. Suppose that the insurer is allowed to purchase excess-of-loss reinsurance and invests her surplus in a financial market consisting of...