Stochastic Volatility

@inproceedings{Hobson1996StochasticV,
  title={Stochastic Volatility},
  author={David G. Hobson},
  year={1996}
}
The volatility of a nancial asset is the variance per unit time of the logarithm of the price of the asset. Volatility has a key role to play in the determination of risk and in the valuation of options and other derivative securities. The widespread Black-Scholes model for asset prices assumes constant volatility. The purpose of this chapter is to review the evidence for non-constant volatility and to consider the implications for option pricing of alternative random or stochastic volatility… CONTINUE READING