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Questions tagged [stochastic-volatility]

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405 questions
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I’m currently working on calibrating volatility models on spx option data (mainly SABR and Heston for now, but I’m also curious about SLV models), and I wanted to ask about practical benchmarks for ...
qujant70's user avatar
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1 vote
1 answer
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I've been looking at Quantlib's FdHestonBarrierEngine fed with a well-behaved local vol surface. Just wanted to clarify something: is this is a proper local ...
user35980's user avatar
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My question might sound dumb, but I hope someone hears me out. I've been learning Heston's stochastic volatility model for a while, but it heavily relies on "The Heston Model and Its Extensions ...
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I’m pricing American style binary options (one-touch) using European option implied volatility within the BS framework and I am concerned about how well BS with its constant volatility assumption ...
onat dicleli's user avatar
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I am trying to learn more about SABR model. Can you recommend any online courses/ classes for learning more about it. So far I have found the following resources. But it will be nice to have an online ...
dijoney J's user avatar
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Consider the Heston model \begin{equation} \begin{cases} dS_t = S_t(\mu dt + \sqrt{v_t} dW^1_t) \\ dv_t = k(\theta - v_t)dt + \sigma \sqrt{v_t} dW_t^2 \\ dB_t = rB_t dt \end{cases} \end{equation} ...
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In a stochastic volatility model, let’s say a Heston model.If I assume that the browning motion governing the equation for the volatility is the same as the one in the main equation, is the volatility ...
rodrigo's user avatar
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Local volatility models such as Dupiré's are arbitrage free if used as single calibration models during the lifetime of a pricing task. But in practice they are recalibrated daily (or possibly intra-...
Pedro's user avatar
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2 answers
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I am currently studying Chapter 6 of the book Stochastic Volatility Modelling by Lorenzo Bergomi which is about the Heston model. After presenting the Heston Model he makes some claims about why the ...
leobgg's user avatar
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1 answer
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Traders keep telling me this (and sounds very trivial/straightforward), but I don't know why (intuition and mathematically). Could someone help?
Michael's user avatar
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1 answer
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In the SABR model, my understanding is that beta essentially determines the backbone of ATM volatility and is usually pre-specified to reflect prior beliefs about the ATM vol skew. However, after ...
Dejean's user avatar
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I have trained a GARCH(1,1) model that does a decent job of forecasting volatility (for real-world stock price time-series). For "known" events such as earnings announcements one can ignore ...
Shreyans's user avatar
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In the "The Volatility Surface: A Practitioner's Guide" book by Jim Gatheral, there's chart, comparing 'Empirical Volatility Surface' (upper) vs 'Heston Fit' (lower). Comparison of the ...
Alex Craft's user avatar
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I am currently in the process of studying the book "Stochastic Volatility Modeling" by Bergomi to get a more practical point of view on volatility. While the math makes perfect sense to me I ...
leobgg's user avatar
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1 answer
245 views

I am reading the Wikipedia page for the Heston Model and it said that with the Ornstein-Uhlenbeck process that models volatility, ${\displaystyle d{\sqrt {\nu _{t}}}=-\theta {\sqrt {\nu _{t}}}\,dt+\...
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