A new nonlinear stochastic volatility model with regime switching stochastic mean reversion and its applications to option pricing

作者：

Highlights：

• We propose a new nonlinear three-factor stochastic volatility model.

• We capture economic cycles and nonlinear volatility mean-reversion.

• We present a closed-form solution for European option pricing.

摘要

•We propose a new nonlinear three-factor stochastic volatility model.•We capture economic cycles and nonlinear volatility mean-reversion.•We present a closed-form solution for European option pricing.

论文关键词：Stochastic volatility,Nonlinearity,Regime switching,Closed-form solution,European option

论文评审过程：Received 21 May 2022, Revised 7 August 2022, Accepted 29 August 2022, Available online 3 September 2022, Version of Record 6 September 2022.

论文官网地址：https://doi.org/10.1016/j.eswa.2022.118742