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Working Papers (1996), ESSEC Business School

Volatility Patterns : Theory and Evidence from the Foreign Exchange Option Market

GESSER V., PONCET Patrice

We compare the ability of two popular option pricing models (Haull and White, and Heston) to produce volatility patterns compatible with those observed on foreign exchange option markets. Using Heston's pricing and hedging formulas brings about a significant improvement on Garman-Kholhagen's classical model.

GESSER, V. and PONCET, P. (1996). Volatility Patterns : Theory and Evidence from the Foreign Exchange Option Market. ESSEC Business School.