Pascucci, Andrea ; Foschi, Paolo
(2006)
Path dependent volatility.
[Preprint]
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Abstract
We propose a general class of non-constant volatility models with dependence on the past.
The framework includes path-dependent volatility models such as that by Hobson&Rogers and
also path dependent contracts such as options of Asian style. A key feature of the model is that
market completeness is preserved. Some empirical analysis, based on the comparison with the
performance of standard local volatility and Heston models, shows the effectiveness of the path
dependent volatility.
Abstract
We propose a general class of non-constant volatility models with dependence on the past.
The framework includes path-dependent volatility models such as that by Hobson&Rogers and
also path dependent contracts such as options of Asian style. A key feature of the model is that
market completeness is preserved. Some empirical analysis, based on the comparison with the
performance of standard local volatility and Heston models, shows the effectiveness of the path
dependent volatility.
Document type
Preprint
Creators
Keywords
option pricing; stochastic volatility; path dependent option
Subjects
DOI
Deposit date
30 Nov 2006
Last modified
16 May 2011 12:04
URI
Other metadata
Document type
Preprint
Creators
Keywords
option pricing; stochastic volatility; path dependent option
Subjects
DOI
Deposit date
30 Nov 2006
Last modified
16 May 2011 12:04
URI
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