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Derivatives Markets with Stochastic Volatility. Edition No. 1

  • ID: 1909745
  • August 2008
  • 180 Pages
  • VDM Publishing House
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Although the assumption of constant volatility is a
reasonable approximation for some markets, in the
last two decades the need for more general non-
constant volatility models has been the driving
force behind numerous works in Financial
Mathematics. In this book we study systems that
arise in interest-rate markets when the volatility
of the short rate is modeled as a function of two
mean-reverting diffusions that vary on different
scales. This allows us to capture a rich variety of
volatility patterns. In the last part of the book
the analysis is extended to other areas, like Value-
at-Risk, in which similar systems arise when the
volatility is modeled as a stochastic process. The
book is oriented to researchers who work in the
field of Mathematical Finance, as well as to
practitioners who would like to gain a better
understanding of how to include stochastic
volatility in their models.

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Rafael De Santiago.
Rafael De Santiago is a professor of Decision Analysis
at IESE Business School, in Barcelona. He holds a Ph.D. in
Mathematics from the University of California, Irvine, and a
Ph.D. in Economics from the University of Valladolid, Spain. His
research interests include derivatives pricing and decision

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