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)

Verition Group LLC ( email )

20 st james street
London, SW1A 1ES
United Kingdom