Stochastic volatility and option pricing
Author:
D. Gkamas
DOI:
10.1088/1469-7688/1/3/601
Publication Frequency:
8 issues per year
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(English)
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Abstract
Through a simple Monte Carlo experiment, Dimitrios Gkamas documents the effects that stochastic volatility has on the distribution of returns and the inability of the normal distribution utilized by the Black-Scholes model to fit empirical returns. He goes on to investigate the implied volatility patterns that stochastic volatility models can generate and potentially explain.
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