Events at CERGE-EI

Prof. Yacine Ait-Sahalia

Princeton University, USA

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Authors: Yacine Aït-Sahalia, Chenxu Li, and Chen Xu Li

Abstract: This paper proposes to build “implied stochastic volatility models” designed to fit option-implied volatility data, and implements a method to construct such models. The method is based on explicitly linking shape characteristics of the implied volatility surface to the specification of the stochastic volatility model. We propose and implement parametric and nonparametric versions of implied stochastic volatility models.

Keywords: implied volatility surface, stochastic volatility, option pricing, closed-form expansion

JEL Classification: G12, C51, C52
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Full Text:  “Implied Stochastic Volatility Models”