A new class of multidimensional Wishart-based hybrid models

Autor:	Daniele Marazzina, Gaetano La Bua
Rok vydání:	2021
Předmět:	Wishart distribution Stochastic volatility Local volatility Computer science Wishart processes Multi-assets New class Wishart process Component (UML) Calibration Market price Econometrics General Economics Econometrics and Finance Finance Hybrid model
Zdroj:	Decisions in Economics and Finance. 45:209-239
ISSN:	1129-6569 1593-8883
Popis:	In this article, we present a new class of pricing models that extend the application of Wishart processes to the so-called stochastic local volatility (or hybrid) pricing paradigm. This approach combines the advantages of local and stochastic volatility models. Despite the growing interest on the topic, however, it seems that no particular attention has been paid to the use of multidimensional specifications for the stochastic volatility component. Our work tries to fill the gap: we introduce two hybrid models in which the stochastic volatility dynamics is described by means of a Wishart process. The proposed parametrizations not only preserve the desirable features of existing Wishart-based models but significantly enhance the ability of reproducing market prices of vanilla options.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::9a51aefafc31ad1e2d242c646b58ea3d https://doi.org/10.1007/s10203-021-00357-4 Zobrazit plný text záznamu Full text from SpringerLink