I. Stochastic Models and Processes · 21. octobre 2023

The SABR model, introduced in 2002, has become a core stochastic volatility tool in quantitative finance, aiding in options pricing and risk management by capturing the dynamics of underlying asset volatility. It calculates implied volatility through calibration to market data, using key parameters to reflect asset price movements and their relation to volatility changes. #SABRModel #VolatilityModeling #OptionsPricing #RiskManagement

I. Stochastic Models and Processes · 06. octobre 2023

GBM is essential in financial forecasting, known for capturing stock price movements and aiding in option pricing. It corrects inflated growth trajectories inherent in continuous compounding, offering a balanced price evolution. Unlike BS model, GBM adjusts expected return downwards to account for volatility, enhancing precision in financial forecasts. #Finance #Stocks #Volatility