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On the complete model with stochastic volatility by Hobson and Rogers

Author

Listed:
  • Andrea Pascucci
  • Marco Di Francesco

Abstract

We examine a recent model, proposed by Hobson and Rogers, which generalizes the classical one by Black and Scholes for pricing derivative securities such as options and futures. We treat the numerical solution of some degenerate partial differential equations governing this financial problem and propose some new numerical schemes which naturally apply in this degenerate setting. Then we aim to emphasize the mathematical tractability of the Hobson-Rogers model by presenting analytical and numerical results comparable with the known ones in the classical Black-Scholes environment.

Suggested Citation

  • Andrea Pascucci & Marco Di Francesco, 2005. "On the complete model with stochastic volatility by Hobson and Rogers," Finance 0503013, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0503013
    Note: Type of Document - pdf; pages: 12
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sekine, Jun, 2008. "Marginal distribution of some path-dependent stochastic volatility model," Statistics & Probability Letters, Elsevier, vol. 78(13), pages 1846-1850, September.
    2. Mauro Rosestolato & Tiziano Vargiolu & Giovanna Villani, 2013. "Robustness for path-dependent volatility models," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 36(2), pages 137-167, November.
    3. Andrea Pascucci & Paolo Foschi, 2005. "Calibration of the Hobson&Rogers model: empirical tests," Finance 0509020, University Library of Munich, Germany.
    4. Cristina Costantini & Marco Papi & Fernanda D’Ippoliti, 2012. "Singular risk-neutral valuation equations," Finance and Stochastics, Springer, vol. 16(2), pages 249-274, April.
    5. Foschi, Paolo & Pascucci, Andrea, 2009. "Calibration of a path-dependent volatility model: Empirical tests," Computational Statistics & Data Analysis, Elsevier, vol. 53(6), pages 2219-2235, April.
    6. Paolo Foschi & Andrea Pascucci, 2008. "Path dependent volatility," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 31(1), pages 13-32, May.

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    • G - Financial Economics

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