Volatility Models: Conclusions
In the paper we concentrate on continuous-time volatility models. These models offer the natural framework for options pricing.
Continuous-time volatility models provide attractive and intuitive de-scription for the observed volatility patterns and observed biases in
implied volatility. In particular smiles, skews and implied volatility term structure arise naturally from stochastic volatility models.
However stochastic volatility model is non-stationary and therefore can be considered as complex nonlinear function, that “describe”
local behavior of the market.
Sergei Mikhailov
hedger@list.ru
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