Turbo warrants under hybrid stochastic and local volatility

Min Ku Lee, Ji Hun Yoon, Jeong Hoon Kim, Sun Hwa Cho

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1 Citation (Scopus)

Abstract

This paper considers the pricing of turbo warrants under a hybrid stochastic and local volatility model. The model consists of the constant elasticity of variance model incorporated by a fast fluctuating Ornstein-Uhlenbeck process for stochastic volatility. The sensitive structure of the turbo warrant price is revealed by asymptotic analysis and numerical computation based on the observation that the elasticity of variance controls leverage effects and plays an important role in characterizing various phases of volatile markets.

Original languageEnglish
Article number407145
JournalAbstract and Applied Analysis
Volume2014
DOIs
Publication statusPublished - 2014 Feb 4

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All Science Journal Classification (ASJC) codes

  • Analysis
  • Applied Mathematics

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