Corpus ID: 56011833

USLV: Unspanned Stochastic Local Volatility Model

@article{Halperin2013USLVUS,
  title={USLV: Unspanned Stochastic Local Volatility Model},
  author={I. Halperin and A. Itkin},
  journal={arXiv: Pricing of Securities},
  year={2013}
}
We propose a new framework for modeling stochastic local volatility, with potential applications to modeling derivatives on interest rates, commodities, credit, equity, FX etc., as well as hybrid derivatives. Our model extends the linearity-generating unspanned volatility term structure model by Carr et al. (2011) by adding a local volatility layer to it. We outline efficient numerical schemes for pricing derivatives in this framework for a particular four-factor specification (two "curve… Expand
3 Citations

Tables from this paper

LSV models with stochastic interest rates and correlated jumps
  • A. Itkin
  • Mathematics, Computer Science
  • Int. J. Comput. Math.
  • 2017

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