In this paper, we present our study on using the hybrid stochastic-local volatility (SLV) model for option pricing. The SLV model contains a stochastic volatility component represented by a volatility process and a local volatility component represented by a so-called leverage function. The...

This thesis presents our study on using the hybrid stochastic-local volatility model for option pricing. Many researchers have demonstrated that stochastic volatility models cannot capture the whole volatility surface accurately, although the model parameters have been calibrated to replicate...

In this paper, we present our study on a hybrid stochastic volatility model incorporating local volatility for pricing options in the foreign exchange (FX) market. The hybrid stochastic-local volatility model (SLV) could match the implied volatility surface well and meanwhile shows the...

Under the background of the electronic security trading platform Xetra operated by Frankfurt Stock Exchange, we consider the Xetra auction market system (XAMS) from 'bottom-up', which the interaction among heterogeneous traders and Xetra auction market mechanism generates non-equilibrium price...

In this paper, we present our research on pricing window barrier options under a hybrid stochastic-local volatility (SLV) model in the foreign exchange (FX) market. Due to the hybrid effect of the local volatility and stochastic volatility components of the model, the SLV model can reproduce the...

In this paper we examine the Heston model in the limit of infinitely fast mean-reversion for the stochastic volatility process (CIR). We show that, under an appropriate scaling of the model parameters, the two-factor stochastic volatility Heston model can be exactly mapped to a one-factor...

We present a numerically efficient approach for machine-learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be used to implement a stochastic implied volatility...

In this paper, we present advanced analytical formulas for SABR model option pricing. The first technical result consists of a new exact formula for the zero correlation case. This closed form is a simple 2D integration of elementary functions, particularly attractive for numerical...

Using the Tsay (1988) outlier identification methodology on daily log-returns of 16 commodity spot price series and 25 commodity index series, this study assesses the impact significant and unexpected news announcements had on volatility between January 1, 1997 and December 31, 2007. Results...

Stochastic volatility models are widely used in interest rate modeling to match the option smiles -- the two most popular are the Heston model and the SABR one. These have been incorporated into arbitrage-free term structure frameworks, Heston-LMM and SABR-LMM respectively.In this paper we...