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Revealing the arcane: an introduction to the art of stochastic volatility models

Tsyplakov, Alexander (2010): Revealing the arcane: an introduction to the art of stochastic volatility models.

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Abstract

This essay is aimed to provide a straightforward and sufficiently accessible demonstration of some known procedures for stochastic volatility model. It reviews the important related concepts, gives informal derivations of the methods and can be useful as a cookbook for a novice. The exposition is confined to classical (non-Bayesian) framework and discrete-time formulations.

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