Path dependent volatility

Andrea Pascucci () and Paolo Foschi

MPRA Paper from University Library of Munich, Germany

Abstract: We propose a general class of non-constant volatility models with dependence on the past. The framework includes path-dependent volatility models such as that by Hobson&Rogers and also path dependent contracts such as options of Asian style. A key feature of the model is that market completeness is preserved. Some empirical analysis, based on the comparison with the performance of standard local volatility and Heston models, shows the effectiveness of the path dependent volatility.

Keywords: option pricing; stochastic volatility; path dependent option (search for similar items in EconPapers)
JEL-codes: G1 C02 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: Written
View list of references View citations in EconPapers

Downloads: (external link)
http://mpra.ub.uni-muenchen.de/973/

Related works:
Journal Article: Path dependent volatility (2008)
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: http://EconPapers.repec.org/RePEc:pra:mprapa:973

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany
Address: Schackstr. 4, D-80539 Munich, Germany
Contact information at EDIRC.
Series data maintained by Ekkehart Schlicht ().