A Stochastic Volatility Alternative to SABR
نویسنده
چکیده
We present two new stochastic–volatility models in which option prices for European plain vanilla options have closed–form expressions. The models are motivated by the wellknown SABR model but use modified dynamics of the underlying asset. The asset process is modelled as a product of functions of two independent stochastic processes: a Cox– Ingersoll–Ross process and a geometric Brownian motion. An application of the model to options written on foreign currencies is studied.
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تاریخ انتشار 2008