The Heston (1993) model generalizes the Black-Scholes setting to one in which
A) Volatility itself evolves according to a geometric Brownian motion.
B) Volatility is a mean-reverting stochastic process.
C) Volatility is a mean-averting stochastic process.
D) Volatility evolves according to an arithmetic Brownian motion.
Correct Answer:
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Q17: The asymmetric GARCH model was developed to
Q18: The current stock price is $100.A $101--strike
Q19: Which of the following assumptions made in
Q20: An option-trading firm is using the Black-Scholes
Q21: The Merton (1976)model
A)Modifies the Black-Scholes model by
Q22: GARCH models
A)Are discrete-time expressions of stochastic volatility
Q24: By augmenting the geometric Brownian motion process
Q25: If the implied volatility surface is flat
Q26: Stochastic volatility models commonly assume
A)There are jumps
Q27: Local volatility models
A)Look to describe volatility
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