Stochastic Volatility Models and the Calibration of the Volatility Premium

 Xu Yang (IMPA, xuyang@impa.br)

In this talk, we will make a brief introduction of stochastic volatility models. Later, we introduce the calibration of the risk premium for the stochastic volatility model that was proposed by Stein and Stein in 1991. In this model, it is assumed that the asset prices follow a diffusive process where the volatility is driven by an arithmetic Ornstein-Uhlenbeck process. The calibration of a linear risk premium was proposed by Velez in 2007. We generalize the method to the nonlinear case and show by means of numerical examples that we can get good adherence to quoted option prices.

This is a joint work with Jorge P. Zubelli (IMPA).

Dia: 21/11/2017

Horário: 13:30

Local: Sala da Pós-Graduação (IM Velho)