Explain stochastic volatility
Explain stochastic volatility.
Expert
Stochastic volatility: As volatility is not easy to measure, and seems to be forever changing, this is natural to model this as stochastic. The most admired model of this type is because of Heston. These models often have some parameters that can either be chosen to fit historical data or, more usually, chosen in order that theoretical prices calibrate to the market. Such volatility models are better at confining the dynamics of traded option prices better than deterministic models. Nonetheless, different markets behave differently. Part of this is due to the way traders look at option price. FX traders look at implied volatility versus delta and Equity traders look at implied volatility versus strike. Therefore it is natural for implied volatility curves to behave differently within these two markets. Due to this there have grown up the sticky strike and sticky delta, etc., models that model how the implied volatility curve changes when the underlying moves.
Define the term pricing derivatives in Monte Carlo simulations.
Why is Crash Metrics very robust?
How many terms are in Black–Scholes equation contained?
Illustrates an example of forward equation?
What is Kelly Fraction? Explain.
Explain the Probabilistic modelling approach in Quantitative Finance.
How is Value of a Contract solved?
What is Attribution?
Explain Poisson process in Brownian motion.
Explain the field of quantitative finance in disrepute for biggest financial collapse in all decades.
18,76,764
1934908 Asked
3,689
Active Tutors
1444268
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!