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A Review of Volatility and Option Pricing

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  • Sovan Mitra

Abstract

The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with constant volatility models up to stochastic volatility. We also survey less commonly known models e.g. hybrid models. We explain various volatility types (e.g. realised and implied volatility) and discuss the empirical properties.

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  • Sovan Mitra, 2009. "A Review of Volatility and Option Pricing," Papers 0904.1292, arXiv.org.
    • Handle: RePEc:arx:papers:0904.1292
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    Cited by:

    1. Qing-Qing Yang & Wai-Ki Ching & Jiawen Gu & Tak-Kuen Siu, 2020. "Trading strategy with stochastic volatility in a limit order book market," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 43(1), pages 277-301, June.
    2. Wang, Chengyang & Nishiyama, Yoshihiko, 2015. "Volatility forecast of stock indices by model averaging using high-frequency data," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 324-337.
    3. Zhengyang Chi & Junbin Gao & Chao Wang, 2024. "Global Stock Market Volatility Forecasting Incorporating Dynamic Graphs and All Trading Days," Papers 2409.15320, arXiv.org, revised Sep 2024.
    4. Ryszard Kokoszczyński & Paweł Sakowski & Robert Ślepaczuk, 2017. "Which Option Pricing Model Is the Best? HF Data for Nikkei 225 Index Options," Central European Economic Journal, Sciendo, vol. 4(51), pages 18-39.

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