Stochastic local volatility (SLV)
Joint S&P 500/VIX smile calibration in discrete and continuous time
An arbitrage-free model for exotic options that captures smiles and futures is presented
A new way to calculate conditional expectations
Gaussian distributions can sharpen one of the most commonly used tools in quant finance
Semi-analytic conditional expectations
A data-driven approach to computing expectations for the pricing and hedging of exotics
Reviving the lost art of perturbation for exotic pricing
Natixis quants find novel way to speed up volatility smile modelling
Singular exotic perturbation
A solution based on local volatility and sensitivities is proposed to calculate exotics' prices
What quant finance can learn from a 240-year-old problem
Optimal transport theory offers a data-driven way to calibrate derivatives pricing models
Follow the moneyness
Barclays quants extend Bergomi’s skew stickiness ratio to all strikes
Sticky varswaps
Bergomi's skew-stickiness ratio is extended to the setting of variance swaps
The step stochastic volatility model
Extreme short-dated skew can be obtained by decomposing it in two parts
Calibration of local-stochastic and path-dependent volatility models to vanilla and no-touch options
In this paper, the authors consider a large class of continuous semi-martingale models and propose a generic framework for their simultaneous calibration to vanilla and no-touch options.
Breaking barriers in options pricing
A new technique for pricing exotic options unifies two classic models
Finite difference schemes with exact recovery of vanilla option prices
A model unifies the classic local vol and binomial trees to accurately price options
Calling out autocallable pricing
Quants show popular autocallable pricing technique has a flaw that has been ignored until now
The interplay between stochastic volatility and correlations in equity autocallables
Study shows issues with pricing autocallables using SLV
You don’t need to sacrifice accuracy for flexibility
BAML quant proposes option pricing model that softens conflict between the two properties
Local stochastic volatility: shaken, not stirred
Dominique Bang introduces a novel LSV approach to term distribution modelling
How old calibration techniques can be applied to exotics pricing
SocGen quants propose technique to more accurately calibrate exotic options
Equity modelling with local stochastic volatility and stochastic discrete dividends
SocGen quants calibrate local stochastic volatility models with stochastic dividends
Swaptions vol modelling tweak opens up pricing possibilities
Nomura quant proposes local volatility model that can directly calibrate to swaption smiles
What causes forex correlation swaps to be mispriced?
UBS quants show prices can differ by up to 25 correlation points if products modelled accurately
Cutting edge intro: history in the modelling
Bloomberg quant Guyon delivers an alternative to stochastic local volatility