Parameter Estimation Of Stochastic Volatility Models And Option Pricing

In this paper, the problems of Ornstein-Uhlenbeck stochastic volatility model are studied. The parameters in the model are discussed. The martingale estimates of the reverting meanm, the reverting speed a , and the volatility ?in the OU processes are given. The martingale estimates of the correlation coefficients p of the stock processes and the volatility processes is also obtained. The properties of the martingale estimates are discussed. The drift velocity of stock price processes is estimated. The pricing of options is discussed. This paper is concentrated on the pricing of a European call option on the model of p in [0, 1]. The results are directly transferable to European puts through the use of put-call parity.