In this paper we prove an approximate formula expressed in terms of elementary functions for the implied volatility in the Heston model. The formula consists of the constant and first order terms in the large maturity expansion of the implied volatility function. The proof is based on...

We show that the implied volatility has a uniform (in log moneyness x) limit as the maturity tends to infinity, given by an explicit closed-form formula, for x in some compact neighborhood of zero in the class of affine stochastic volatility models. This expression is function of the convex dual...

In equity and foreign exchange markets the risk-neutral dynamics of the underlying asset are commonly represented by stochastic volatility models with jumps. In this paper we consider a dense subclass of such models and develop analytically tractable formulae for the prices of a range of...

Modeling stock prices via jump processes is common in financial markets. In practice, to hedge a contingent claim one typically uses the so-called delta-hedging strategy. This strategy stems from the Black-Merton-Scholes model where it perfectly replicates contingent claims. From the theoretical...

We study triangulation schemes for the joint kernel of a diffusion process with uniformly continuous coefficients and an adapted, non-resonant Abelian process. The prototypical example of Abelian process to which our methods apply is given by stochastic integrals with uniformly continuous...

It is a widely recognized fact that risk-reversals play a central role in the pricing of derivatives in foreign exchange markets. It is also known that the values of risk-reversals vary stochastically with time. In this paper we introduce a stochastic volatility model with jumps and local...