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2023

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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/213430

A hybrid stochastic volatility model in a Lévy market

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https://doi.org/10.1016/j.iref.2023.01.005

Abstract

This paper deals with the problem of pricing and hedging financial options in a hybrid stochastic volatility model with jumps and a comparative study of its stylized facts. Under these settings, the market is incomplete, which leads to the existence of infinitely many risk-neutral measures. In order to price an option, a set of risk-neutral measures is determined. Moreover, the PIDE of an option price is derived using the Itô formula. Furthermore, Malliavin–Skorohod Calculus is utilized to hedge options and compute price sensitivities. The obtained results generalize the existing pricing and hedging formulas for the Heston as well as for the CEV stochastic volatility models.

Subject

Mètode de Montecarlo, Anàlisi estocàstica, Política de preus

Subject (English)

Monte Carlo method, Analyse stochastique, Prices policy

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Articles publicats en revistes (Matemàtica Econòmica, Financera i Actuarial)

Citation

EL-KHATIB, Youssef, et al. A hybrid stochastic volatility model in a Lévy market. International Review of Economics & Finance. 2023. Vol. 85, num. 220-235. ISSN 1059-0560. [consulted: 15 of August of 2026]. Available at: https://hdl.handle.net/2445/213430

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