Derivatives, especially equity and volatility options, contain valuable and oftentimes essential information for … estimating stochastic volatility models. Absent strong assumptions, their typically highly nonlinear pricing dependence on the … jointly accounts for stock returns as well as prices of equity and volatility options. Finally, we provide numerical results …

volatility model, such as the Heston model, has not been reported at all. Adopting the method of matched asymptotic expansions … volatility near expiry. Through our analyses, we are able to show that the option price will be quite different from that … the constant volatility case if the spot volatility is given the same value as the constant volatility in the Black …

stochastic volatility. Although both types of ambiguity considerably impact the optimal portfolio, we show that stock return … ambiguity is more significant for stock allocation whereas volatility uncertainty has larger influence on derivatives trading …. As expected, investors with no access to derivatives would not have additional losses from ignoring volatility …