The Alpha‐Heston stochastic volatility model

Ying Jiao, Chunhua Ma, Simone Scotti and Chao Zhou

Mathematical Finance, 2021, vol. 31, issue 3, 943-978

Abstract: We introduce an affine extension of the Heston model, called the α‐Heston model, where the instantaneous variance process contains a jump part driven by α‐stable processes with α∈(1,2]. In this framework, we examine the implied volatility and its asymptotic behavior for both asset and VIX options. Furthermore, we study the jump clustering phenomenon observed on the market. We provide a jump cluster decomposition for the variance process where each cluster is induced by a “mother jump” representing a triggering shock followed by “secondary jumps” characterizing the contagion impact.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1111/mafi.12306

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:mathfi:v:31:y:2021:i:3:p:943-978

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0960-1627

Access Statistics for this article

Mathematical Finance is currently edited by Jerome Detemple

More articles in Mathematical Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().