Stock Price Distributions with Stochastic Volatility: An Analytic Approach
AbstractWe study the stock price distributions that arise when prices follow a diffusion process with a stochastically varying volatility parameter. We use analytic techniques to derive an explicit closed-form solution for the case where volatility is driven by an arithmetic Ornstein-Ublenbeck (or AR1) process. We then apply our results to two related problems in the finance literature: (1) options pricing in a world of stochastic volatility, and (2) the relationship between stochastic volatility and the nature of "fat tailes" in stock price distributions. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Society for Financial Studies in its journal Review of Financial Studies.
Volume (Year): 4 (1991)
Issue (Month): 4 ()
Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.