Dresden 2006 – wissenschaftliches Programm

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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 10: Poster Session (posters are expected to be displayed the full day 8:30-18:00)

AKSOE 10.6: Poster

Mittwoch, 29. März 2006, 16:00–18:00, P2

Multiple time scales and the exponential Ornstein-Uhlenbeck stochastic volatility model — •Josep Perelló and Jaume Masoliver — Universitat de Barcelona

We study the exponential Ornstein-Uhlenbeck stochastic volatility model and observe that the model shows a multiscale behavior in the volatility autocorrelation. It also exhibits a leverage correlation and a probability profile for the stationary volatility which are consistent with market observations. All these features make the model quite appealing since it appears to be more complete than other stochastic volatility models also based on a two-dimensional diffusion. We present an approximate solution for the return probability density designed to capture the kurtosis and skewness effects. This approximate is also very useful to option pricing. We finally study the smile effect in this model with parameters estimated with the underlying data.