<t>For anybody that has read Neuberger's paper, I am slightly confused as to why equation (2) should be satisfied. It seems to indicate that the trader assumes volatility to be a deterministic function of time. Suppose, instead, that the trader believes that volatility is stochastic (e.g. Heston)dS ...

Thanks for the reply. That should set me looking in the right direction.

BTW, I just noticed who I'm speaking to. I've gotten a lot of mileage out of "Option Valuation under Stochastic Volatility" -- great book. Any chance you'll be stopping by UCSB this year?

Yep. Beta is independent of W_t.

<t>Sorry, my explanation was unclear. Let me try again:X is killed when it touches a boundary. However, that does not mean that W can not cross the boundary. If W is above U from time t2 to t3, but Beta jumps from t1 to t4 (t1<t2<t3<t4) then X is not killed because, in this example, X does not go ab...

<t>I'm not sure how to tackle the following problem. Any insight you can offer would be greatly appreciated.Suppse a stock, X(t) obeys:Where W is a BM and Beta is a levy process with positive jumps and positive drift.Now, I want to price a double-barrier option on this stock. So, I need the transiti...

Mil Gracias guys.

<t>When I go to yahoo finance, and type in GOOG, for example, and then click on "options chain", are the options listed American or European style? I always assumed they were European. But, somebody recently told me that they were American. And, in fact, a few websites say that most options traded o...

Thanks guys. That helps a lot.

<t>I downloaded some SPX option data from CBOE last week, and I want to calibrate my SV model to market option prices. Are there any "industry standards" as to which options I should calibrate my model to and which options I should ignore. e.g.1) only look at options with open interest greater than_...

Thanks! I'll give it a try.

<t>Looking through previous posts, it seems some students have had success obtaining option data from people on this site. So, at the risk of beating a dead horse, here's my request...I am trying to calibrate the Heston Model to some SPX options, but I am not having much luck getting my hands on any...

<t>Does anybody have a matlab code to calculate a heston call price that is stable over all strikes and maturities? I've attached my code if anybody cares to take a look. It works fine until you reach maturities of about 1.25 years. At that point, all it spits out is the dreaded NaN.My notation is s...

<t>Suppose you have a two state continuous time markov chain (X_t = {1,2}). Jumps occur randomly with exponential distribution with parameter mu and lamda. I have the transition matrix (though it's more latex than I care to type at the moment). Fix a time T in the future. What is the distribution of...

<t>Hmm...well, that's disappointing to hear. But, it's certainly better to have accurate information than to be misinformed. The good news, as I have alluded to before, is that I am in no rush to figure all of this out. I still have 3 or 4 more years before I get my PhD. At that point, I might be si...