The beta stochastic volatility model

The beta stochastic volatility model


The traditional approach to stochastic volatility (SV) modelling begins with the specification of an SV process, typically on the grounds of its analytical tractability (see, for example, Heston, 1993). Then, after a closed-form solution for vanilla options has been derived and implemented, the parameters of the SV process are calibrated to the implied volatility surface of vanilla options using complicated non-linear optimisation methods. The drawback of this approach for business applications

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