Option Valuation with Long-run and Short-run Volatility Components

Authors:
  • PCPeter Christoffersen
    Peter Christoffersen
  • KJKris Jacobs
    Kris Jacobs
  • YWYintian Wang
    Yintian Wang
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Abstract
This paper presents a new model for the valuation of European options. In our model, the volatility of returns consists of two components. One of these componen