Option pricing under stochastic volatility model.
Lim, Hak Min.
Lim, Gerald Kim Meng.
Yeo, Yew Teck.
Date of Issue2003
College of Business (Nanyang Business School)
In this paper, we examine the stochastic volatility model of Schobel and Zhu (1999) where volatility follows a mean-reverting Ornstein-Uhlenbeck process. This is basically an extension of the Stein and Stein model (1991) but which allows for correlation between instantaneous volatilities and spot returns.
Nanyang Technological University