December 2015
Intermediate to advanced
522 pages
20h
English
Content preview from Stochastic Volatility Modeling
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xii Contents
8.9 Forward-start options – future smiles . . . . . . . . . . . . . . . . . 333
8.10 Impact of the smile of volatility of volatility on the vanilla smile . . 335
Appendix A – Monte Carlo algorithms for vanilla smiles . . . . . . . . . 336
A.1 The mixing solution . . . . . . . . . . . . . . . . . . . . . . 336
A.2 Gamma/theta P&L accrual . . . . . . . . . . . . . . . . . . . 338
A.3 Timer option-like algorithm . . . . . . . . . . . . . . . . . . 340
A.4 A comparison . . . . . . . . . . . . . . . . . . . . . . . . . . 342
A.5 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344
A.5.1 An ecient approximation . . . . . . . . . . . . . 345
Appendix B – local volatility function of stochastic volatility models . . 345
Appendix ...
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