Computing the implied volatility in stochastic volatility models

The Black-Scholes model [6,23] has gained wide recognition on financial markets. One of its shortcomings, however, is that it is inconsistent with most observed option prices.

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Bibliographic Details
Published in:Communications on pure and applied mathematics 2004-10, Vol.57 (10), p.1352-1373
Main Authors: Berestycki, Henri, Busca, Jérôme, Florent, Igor
Format: Article
Language:English
Subjects:
Applications
Applied sciences
Exact sciences and technology
Insurance, economics, finance
Mathematical models
Mathematics
Operational research and scientific management
Operational research. Management science
Portfolio theory
Probability and statistics
Probability theory and stochastic processes
Sciences and techniques of general use
Special processes (renewal theory, markov renewal processes, semi-markov processes, statistical mechanics type models, applications)
Statistics
Stochastic models
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Description
Summary:The Black-Scholes model [6,23] has gained wide recognition on financial markets. One of its shortcomings, however, is that it is inconsistent with most observed option prices.
ISSN:0010-3640
1097-0312
DOI:10.1002/cpa.20039