We introduce a new microstructure noise index for financial data. This index, the computation of which is based on the p-variations of the considered asset or rate at different time scales, can be interpreted in terms of Besov smoothness spaces. We study the behavior of our new index using...

This paper investigates the pricing bias in the Swedish OMX-Index Option market and how a stochastic volatility affects European call option prices. The market is purely European and without dividends for the period studied. A CIR square-root process for the volatility is estimated with...

This paper investigates the pricing bias in the Swedish OMX-Index Option market and how a stochastic volatility affects European call option prices. The market is purely European and without dividends for the period studied. A CIR square-root process for the volatility is estimated with...

It is known that Heston's stochastic volatility model exhibits moment explosion, and that the critical moment s+ can be obtained by solving (numerically) a simple equation. This yields a leading-order expansion for the implied volatility at large strikes: σBS(k, T)2T ∼ Ψ(s+ - 1) × k (Roger...

We consider models for the valuation of derivative securities that depend on foreign exchange rates. We derive partial differential equations for option prices in an arbitrage-free market with stochastic volatility. By use of standard techniques, and under the assumption of fast mean reversion...