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 instan-taneous volatilities and the underlying...

This book provides a comprehensive, up-to-date treatment of the application of Fourier analyses to pricing standard and exotic options, and discusses three different factors: stochastic volatility, stochastic interest rate and random jump. The modeling of volatility and interest rate falls into...

In this paper, I address systematically how to enhance the most existing option models with piecewise-constant parameters, and how to derive the corresponding closed-form characteristic function under the risk-neutral measure. As long as the characteristic function with piecewise-constant...

Since the Financial Crisis in 2009, interest rate derivative markets have witnessed a dramatic change in the valuation, especially with respect to cash-flow discounting, forward curve building und counterpart risks. The application of OIS discount curve to value collateralised interest...