Master semester project: 2008-2009





==== Stochastic Volatility Models ====
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**Description:**\\ 

The purpose of the project is to study the theory behind the Black & Scholes formula and various volatility models, with a practical application to option pricing. 

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**Prerequisites:**\\ 
The student should have a prior knowledge of stochastic calculus.\\ 
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**References:**

D. Lamberton, B. Lapeyre, "Introduction au calcul stochastique applique a la finance", Ellipses, 1997.\\

S. A. Hesten, "A Closed-Fom Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options", The Review of Financial Studies, Vol . 6, No 2, 1993.\\

E. Derman, I. Kani, "Stochastic Implied Trees: Arbitrage Pricing with Stochastic Term and Strike Structure of Volatility", International Journal of Theoretical and Applied Finance (IJTAF), Vol. 1,  No 1, January 1998, pp. 61 - 110.\\

**Supervisor:**

Olivier Lévêque (LTHI) * Email: olivier.leveque#epfl.ch * Office: INR-132 * tel: 38112\\ 
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