his paper provides the pricing for a new class of derivatives with different affine stochastic volatility models. These products are characterized by payoffs depending on both stock and its volatility. We provide closed-form solutions for different products and two multivariate Wishart-based stochastic volatility models. The methodology is independent of the dimension of the problem. Overall, our results highlight the great flexibility and tractability of Wishart-based stochastic volatility models to develop multivariate extensions of the Heston model.

Analytic pricing of volatility-equity options within Wishart-based stochastic volatility models

Gnoatto, Alessandro;Grasselli, Martino
2015-01-01

Abstract

his paper provides the pricing for a new class of derivatives with different affine stochastic volatility models. These products are characterized by payoffs depending on both stock and its volatility. We provide closed-form solutions for different products and two multivariate Wishart-based stochastic volatility models. The methodology is independent of the dimension of the problem. Overall, our results highlight the great flexibility and tractability of Wishart-based stochastic volatility models to develop multivariate extensions of the Heston model.
2015
Option pricing
Target volatility option
Corridor variance swap
Double digital call
Wishart stochastic volatility models
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11562/976090
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