Stochastic Volatility for Real

22 Pages Posted: 27 Apr 2006

Date Written: March 1, 2006

Abstract

We combine classical ideas of separable volatility structures in the HJM framework with the latest techniques for calibration of stochastic volatility models and create a new class of efficient multi-factor term structure models with stochastic volatility. These models have the flexibility of as the Libor market models but the speed of the short rate models.

Keywords: Yield curve models, stochastic volatility, Markov property

JEL Classification: G13

Suggested Citation

Andreasen, Jesper, Stochastic Volatility for Real (March 1, 2006). Available at SSRN: https://ssrn.com/abstract=898701 or http://dx.doi.org/10.2139/ssrn.898701

Jesper Andreasen (Contact Author)

Saxo Bank ( email )

Philip Heymans Alle 15
Hellerup, 2900
Denmark

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