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Paper / 2023SMQ / 245770007287379
The quintic Ornstein-Uhlenbeck volatility model that jointly calibrates SPX & VIX smiles
Camille Illand / Eduardo Abi Jaber / Shaun Xiaoyuan Li
model calibration / monte carlo simulationResource overview

The quintic Ornstein-Uhlenbeck volatility model that jointly calibrates SPX & VIX smiles

Paper2023

by Camille Illand, Eduardo Abi Jaber, Shaun Xiaoyuan Li

Tags
model calibrationmonte carlo simulationoption pricingstochastic processes

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Suggested foundations for volatility models and surfaces and options and derivatives pricing. Specialist prerequisites vary by paper.

Before you read

  1. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow diffusion-based models and their assumptions.

  2. ARCH and GARCH

    Separate conditional volatility from observed returns.

  3. The Binomial Model

    Build replication and risk-neutral probabilities in a tractable model.

  4. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

Go further

  1. Stochastic Volatility and the Heston Model

    Study a correlated stochastic-variance model.

  2. Reading the Implied Vol Surface — Moneyness, Term Structure, and Quoting Conventions

    Interpret prices across strikes and expiries.

  3. The Black-Scholes PDE, Formula and Implied Volatility

    Connect the pricing equation, closed-form value and implied volatility.

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Explore Advanced Derivatives and Exotic Options Explore Derivatives Pricing and Computational Finance

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