We consider a stochastic volatility model of the mean-reverting type to describe the evolution of a firm’s values … default probability. Our simulation results indicate that the stochastic volatility model tends to predict higher default … probabilities than the corresponding Merton model if a firm’s credit quality is not too low. Otherwise the stochastic volatility …

the pricing of European-style foreign currency options and for the volatility strike structure implicit in these contracts … is devoloped. The curvature of the volatility strike structure is explained by focusing attention on the expected … characteristic convex shape of volatility strike structures documented in the empirical literature. A volatility-based test for …

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 …

We focus on closed-form option pricing in Heston's stochastic volatility model, in which closed-form formulas exist …

comparison is the choice of the fastest method for the calibration of stochastic volatility models, e.g. Heston, Bates, Barndorff …

We are concerned with the valuation of European options in Heston's stochastic volatility model with correlation. Based …

The Heston model stands out from the class of stochastic volatility (SV) models mainly for two reasons. Firstly, the … process for the volatility is nonnegative and mean-reverting, which is what we observe in the markets. Secondly, there exists …

financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of G … this more complex situation and consider stock price dynamics which exclude arbitrage opportunities. Due to volatility …