depict this fact. In this paper we incorporate excess volatility into a simple DCF model by considering an autoregressive … cash flows process with random coefficients. We show that the model is free of arbitrage and that the transversality … (respectively dividend-price ratio) is stochastic and our model represents excess volatility. We discuss whether our assumptions are …

Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model … is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior …

volatility models including long memory and leverage effects. We compute the price by applying a present value scheme as well as … the Black-Scholes and Hull-White formulas which includes stochastic volatility. We find that long memory as well as …

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 …

In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility …

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

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 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 …