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...

In this paper, we introduce a unified pricing framework for options by applying the Fourier analysis where stochastic volatility, stochastic interest rate and random jump are independently specified. The modeling of volatility and interest rate falls into four different alternatives: constant,...

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...

In this paper we will establish a generalized Swap Market Model (GSMM) by unifying the stochastic process of swap rates with constant tenors under a single swap measure. GSMM is a natural extension of Libor Market Model (LMM) for swap rates, and LMM can be considered as a special case of GSMM...

In this paper we extend standard Libor Market Model (LMM) with nested stochastic volatilities. The stochastic volatility of each Libor follows a mean-reverting process as in Schoebel and Zhu (1999) or in Heston (1993) under the individual forward measure of each Libor. Other than the existing...

In this paper we will propose a simple approach to simulating Heston model efficiently and accurately. All existing simulation schemes so far directly work with the mean-reverting square root process of the variance in Heston model, instead we transform the variance to an equivalent volatility...