Sensitivity analysis and Density Estimation for the Hobson-Rogers Stochastic Volatility Model.
journal contributionposted on 16.09.2009, 14:20 by Reiichiro Kawai
Monte Carlo estimators of sensitivity indices and the marginal density of the price dynamics are derived for the Hobson-Rogers stochastic volatility model. Our approach is based mainly upon the Kolmogorov backward equation by making full use of the Markovian property of the dynamics given the past information. Some numerical examples are presented with a GARCH-like volatility function and its extension to illustrate the effectiveness of our formulae together with a clear exhibition of the skewness and the heavy tails of the price dynamics.