Cheng, Ai-ru; Gallant, A. Ronald; Ji, Chuanshu; Lee, Beom S. - In: Journal of Econometrics 146 (2008) 1, pp. 44-58
We consider European options on a price process that follows the log-linear stochastic volatility model. Two stochastic integrals in the option pricing formula are costly to compute. We derive a central limit theorem to approximate them. At parameter settings appropriate to foreign exchange data...