Mathematical Finance and Probability Seminars (Since covid these events are taking place online.)

We present two new stochastic-volatility models in which option prices for European plain vanilla options have closed- expressions. The models are motivated by the wellknown SABR model but use modified dynamics of the underlying asset. The asset process is modeled as a product of functions of two independent stochastic processes: a Cox-Ingersoll-Ross process and a geometric Brownian motion. An application of the model to options written on foreign currencies is studied. Joint work with Chris Rogers (Cambridge University).

Speaker: Luitgard Veraart, Princeton University