Stochastic volatility
Skewing the correlation in local and stochastic volatility frameworks via copulas
A copula-based model to capture correlation skew in multi-asset derivatives is presented
The power of neural networks in stochastic volatility modeling
The authors apply stochastic volatility models to real-world data and demonstrate how effectively the models calibrate a range of options.
On the boundary conditions adopted in stochastic volatility option pricing models
The authors recommend boundary conditions that should be adopted when pricing European- and American-style options under the Heston model.
Quant of the year: Julien Guyon
Risk Awards 2025: Volatility modeller par excellence (and football fan) achieved breakthrough with joint calibration of S&P and Vix options
Option pricing under the normal stochastic alpha–beta–rho model with Gaussian quadratures
The authors integrate a Gaussian quadrature for option pricing under the normal alpha–beta–rho model, which they demonstrate to calculate accurate, arbitrage-free price and delta.
A multidimensional transform for pricing American options under stochastic volatility models
The authors put forward a transform-based method for pricing American options which is computationally efficient and accurate under under low-dimensional stochastic volatility models.
Podcast: Artur Sepp on rates volatility and decentralised finance
Quant says high volatility requires pricing and risk management models to be revisited
A robust stochastic volatility model for interest rates
A swaption pricing model based on a single-factor Cheyette model is shown to fit accurately
The quintic Ornstein-Uhlenbeck model for joint SPX and VIX calibration
A new model that jointly fits the smiles of VIX and SPX is presented
Trading the vol-of-vol risk premium
Applications of the vol-of-vol parameter for cross-asset derivatives are presented
Swap rate: cash-settled swaptions in the fallback
A fallback pricing method that reduces vanilla swaptions’ complexity is introduced
Singular exotic perturbation
A solution based on local volatility and sensitivities is proposed to calculate exotics' prices
Robust product Markovian quantization
In this paper the authors formulate the one-dimensional RMQ and d-dimensional PMQ algorithms as standard vector quantization problems by deriving the density, distribution and lower partial expectation functions of the random variables to be quantized at…
Optimal transport for model calibration
Volatility models and SPX/VIX joint dynamics are calibrated using optimal transport theory
A review of tree-based approaches to solving forward–backward stochastic differential equations
This paper looks at ways of solving (decoupled) forward–backward stochastic differential equations numerically using regression trees.
Sticky varswaps
Bergomi's skew-stickiness ratio is extended to the setting of variance swaps
An artificial neural network representation of the SABR stochastic volatility model
In this paper the universal approximation theorem of artificial neural networks (ANNs) is applied to the stochastic alpha beta rho (SABR) stochastic volatility model in order to construct highly efficient representations.
The impact of compounding on bond pricing with alternative reference rates
This paper looks at the impact of compounding on zero-coupon bond prices by considering the short rate when it follows a Gaussian diffusion process or a stochastic volatility jump-diffusion process.
Forecasting stock market volatility: an asymmetric conditional autoregressive range mixed data sampling (ACARR-MIDAS) model
This paper proposes an extension of the classical CARR model, the ACARR-MIDAS model, to model volatility and capture the volatility asymmetry as well as volatility persistence.
Explaining credit ratings through a perpetual-debt structural model
This paper calibrates a perpetual-debt structural model (PDSM) by using Moody’s historical credit ratings.
Expansion method for pricing foreign exchange options under stochastic volatility and interest rates
This paper applies the smart expansion method to the Heston–Hull–White model, which admits stochastic interest rates to enhance the model, and obtains the expansion formula for pricing options in the model up to second order.