We introduce a stochastic volatility model with self-exciting jump intensity to capture the change in pricing dynamic …

Tests for the existence and the sign of the volatility risk premium are often based on expected option hedging errors … the premium is the same as the sign of the mean hedging error for a large class of stochastic volatility option pricing …

volatility risk, for dollar, euro and pound rates at a daily frequency, between October 1998 and August 2006. The measurement of … the volatility risk premium rests on a simple model according to which variance forecasts are generated under the … large - negative - compensation for volatility risk, a component which was smaller in absolute terms - but not relative to …

to model a credit quality process as an Itô integral with respect to a Brownian motion with a stochastic volatility … conditional default probabilities and credit spreads. An example for a volatility process is the square root of a Lévy …

, a credit quality process is driven by an Itô integral with respect to a Brownian motion with stochastic volatility … default probabilities and credit spreads. An example for a volatility process is the square root of a Lévy-driven Ornstein …-Uhlenbeck process. We show that jumps in the volatility translate into jumps in credit spreads. We examine the dynamics of the OS …

.g., stochastic volatility: there is one market price of risk for each jump size (and not just the market price of jump risk). Thus …

This paper presents a new numerical method for pricing American call options when the volatility of the price of the … volatility changes, we derive an integral representation of an American call price and the early exercise premium which holds … under stochastic volatility. This representation is used to develop a numerical method for pricing the American options …

of the volatility spread to skewness. We measure skewness from option prices and test these predictions. We find that … conditioning on skewness increases the predictive power of the volatility spread and that coefficient estimates accord with theory … the term structure of option-implied volatility, skewness and kurtosis and find that time-dependence in returns has a …

, especially on the BS implied volatility. Implied binomial trees (IBT) models capture the variations of the implied volatility … known as volatility smile. They provide a discrete approximation to the continuous risk neutral process for the underlying … Barle and Cakici (BC). After the formation of IBT we can estimate the implied local volatility and the state price density …