Option pricing and implied volatilities in a 2-hypergeometric stochastic volatility model

We derive closed-form analytical approximations in terms of series expansions for option prices and implied volatilities in a 2-hypergeometric stochastic volatility model with correlated Brownian motions. As in [4], these expansions allow us to recover the well-known skew and smile phenomena on implied volatility surfaces, depending on the values of the correlation parameter. Key words: Stochastic volatility; 2-hypergeometric model; implied volatility; series expansions. Mathematics Subject Classification: 91G20; 91B70; 35A35.

• Type: Journal
• Year: 2016
• Where: APPML
• Authors: Nicolas Privault, Qihao She
• Keywords: APPML 2016, Software Engineering