English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Global: Zendy Plus annual

Presents the access of premium content as premium feature

Premium Content

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Global: Zendy Plus monthly

Global: Zendy Tools annual

Global: Zendy Tools monthly

Global: Zendy Free Plan

In this paper, we develop a 4/2 stochastic volatility plus jumps model,namely, a new stochastic volatility model including the Heston model and 3/2model as special cases. Our model is highly tractable by applying the Liesymmetries theory for PDEs, which means that the pricing procedure can beperformed efficiently. In fact, we obtain a closed-form solution for the jointFourier-Laplace transform so that equity and realized-variance derivatives canbe priced. We also employ our model to consistently price equity and VIXderivatives. In this process, the quasi-closed-form solutions for future andoption prices are derived. Furthermore, through adopting data on daily VIXfuture and option prices, we investigate our model along with the Heston modeland 3/2 model and compare their different performance in practice. Our resultillustrates that the 4/2 model with an instantaneous volatility of the form$(a\sqrt{V_t}+b/\sqrt{V_t})$ for some constants $a, b$ presents considerableadvantages in pricing VIX derivatives.

Consistent Pricing of VIX and Equity Derivatives with the 4/2 Stochastic Volatility Plus Jumps Model