2015
DOI: 10.1016/j.amc.2014.11.040
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FX options pricing in logarithmic mean-reversion jump-diffusion model with stochastic volatility

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Cited by 3 publications
(3 citation statements)
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“…The estimation outcomes of the double Heston model and the model are also in accordance with the results in Christoffersen et al [5] that the two factors of the variance have different mean reversion levels and they show the correlations between the two returns and the variance. We also plot the market implied volatilities and the model implied volatilities to compare the effects of different models based on the market data [35]. We adopt the bisection algorithm [33] to discover the market and model implied volatilities.…”
Section: Calibrationmentioning
confidence: 99%
“…The estimation outcomes of the double Heston model and the model are also in accordance with the results in Christoffersen et al [5] that the two factors of the variance have different mean reversion levels and they show the correlations between the two returns and the variance. We also plot the market implied volatilities and the model implied volatilities to compare the effects of different models based on the market data [35]. We adopt the bisection algorithm [33] to discover the market and model implied volatilities.…”
Section: Calibrationmentioning
confidence: 99%
“…Since Garman and Kohlhagen 1 initiated a study evaluating FX options under the spot rate dynamics given by a geometric Brownian motion, several studies have attempted to capture the volatility skew (smile/smirk) in the market by modifying and extending the constant volatility assumption of the Garman–Kohlhagen model. See Melino and Turnbull, 2 Janek et al, 3 Ahlip and Lutkowski, 4 and Zhong et al 5 …”
Section: Introductionmentioning
confidence: 99%
“…Thus, we require a new extended model that can cope with this characteristic of FX option markets. Zhong et al 5 proposed the logarithmic mean‐reversion jump‐diffusion model with stochastic volatility to capture the smile in FX option markets. However, their model is a three‐factor model.…”
Section: Introductionmentioning
confidence: 99%