Stochastic Calculus: Application to calculating Leverage effect in Stochastic Volatility models

Ionut Florescu, Sep. 19, 2007

In this talk we will analyze two specifications of the return process available in financial markets. We will mathematically formalize the definition of the leverage effect and we will calculate this effect in general for the specifications under study. We will finish the talk exemplifying the formulas obtained for several specific cases. We conclude with a discussion.

This is joint work with Prof. C. G. Pasarica.