Autors:

CiteWeb id: 19930000068

CiteWeb score: 5551

DOI: 10.1093/rfs/6.2.327

I use a new technique to derive a closed-form solutionfor the price of a European call option on an asset with stochastic volatility. The model allows arbitrary correlation between volatility and spotasset returns. I introduce stochastic interest rates and show how to apply the model to bond options and foreign currency options. Simulations show that correlation between volatility and the spot asset's price is important for explaining return skewness and strike-price biases in the BlackScholes (1973) model. The solution technique is based on characteristic functions and can be applied to other problems.

The publication "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options" is placed in the Top 10000 of the best publications in CiteWeb. Also in the category Economics it is included to the Top 1000. Additionally, the publicaiton "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options" is placed in the Top 100 among other scientific works published in 1993.
Links to full text of the publication: