The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of the asset price process. An interplay between the...

A passport option is a call option on the profits of a trading account. In this article, the robustness of passport option pricing is investigated by incorporating stochastic volatility. The key feature of a passport option is the holders' optimal strategy. It is known that in the case of...

The paper describes an implicit finite difference approach to the pricing of American options on assets with a stochastic volatility. A multigrid procedure is described for the fast iterative solution of the discrete linear complementarity problems that result. The accuracy and performance of...

Following the increasing awareness of the risk from volatility fluctuations, the market for hedging contracts written on realized volatility has surged. Companies looking for means to secure against unexpected accumulation of market activity can find over-the-counter products written on...

Finite element methods are described for valuing lookback options under stochastic volatility. Particular attention is paid to the method for handling the boundary equations. For some boundaries, the equations reduce to first-order hyperbolic equations which must be discretized to ensure that...

It is well known that stochastic volatility is an essential feature of commodity spot prices. By using methods of singular perturbation theory, we obtain approximate but explicit closed-form pricing equations for forward contracts and options on single- and two-name forward prices. The expansion...

This paper extends the class of deterministic volatility Heath-Jarrow-Morton models to a Markov chain stochastic volatility framework allowing for jump discontinuities and a variety of deformations of the term structure of forward rate volatilities. Analytical solutions for the dynamics of the...

This paper develops a subordinated stochastic process model for an asset price, where the directing process is identified as information. Motivated by recent empirical and theoretical work, the paper makes use of the under-used market statistic of transaction count as a suitable proxy for the...

This paper studies Heath-Jarrow-Morton-type models with regime-switching stochastic volatility. In this setting the forward rate volatility is allowed to depend on the current forward rate curve as well as on a continuous time Markov chain y with finitely many states. Employing the framework...

This paper studies the effect of introducing stochastic volatility in the first-passage structural approach to default risk. The impact of volatility time scales on the yield spread curve is analyzed. In particular it is shown that the presence of a short time scale in the volatility raises the...