Analysis of Stochastic Volatility Models in Financial Derivatives Pricing
Zhang Haocheng · Financial Engineering and Risk Management · 2024
In the study of volatility in financial markets, stochastic volatility model has become an important tool in the field of derivatives pricing with its unique theoretical perspective and strong empirical explanatory power. Aiming at the pricing problem of financial derivatives, this paper systematically analyzes the theoretical basis and application method of stochastic volatility model. Through the in-depth discussion of model construction, parameter estimation strategy and its practical application in derivatives pricing, this paper reveals the significant effect of stochastic volatility model in improving pricing accuracy and enhancing risk management ability. The paper also points out the limitations of the model in dealing with the pricing of derivatives in different market environments, and puts forward the corresponding improvement direction. The results show that the stochastic volatility model has a wide application prospect in the financial derivatives market and is of great significance in promoting the innovation and development of financial theory and practice.