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I use a new technique to derive a closed-form solution for the price of a European call option on an asset with stochastic volatility. The model allows arbitrary correlation between volatility and spotasset returns. I in...

Previous article Next article Fractional Brownian Motions, Fractional Noises and ApplicationsBenoit B. Mandelbrot and John W. Van NessBenoit B. Mandelbrot and John W. Van Nesshttps://doi.org/10.1137/1010093PDFBibTexSecti...

Traditional econometric models assume a constant one-period forecast variance. To generalize this implausible assumption, a new class of stochastic processes called autoregressive conditional heteroscedastic (ARCH) proce...

The authors present a simple overlapping generations model of an asset market in which irrational noise traders with erroneous stochastic beliefs both affect prices and earn higher expected returns. The unpredictability ...