A hybrid stochastic volatility model in a Lévy market

Youssef El-Khatib, Stephane Goutte, Zororo S. Makumbe, Josep Vives

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


This paper deals with the problem of pricing and hedging financial options in a hybrid stochastic volatility model with jumps and a comparative study of its stylized facts. Under these settings, the market is incomplete, which leads to the existence of infinitely many risk-neutral measures. In order to price an option, a set of risk-neutral measures is determined. Moreover, the PIDE of an option price is derived using the Itô formula. Furthermore, Malliavin–Skorohod Calculus is utilized to hedge options and compute price sensitivities. The obtained results generalize the existing pricing and hedging formulas for the Heston as well as for the CEV stochastic volatility models.

Original languageEnglish
Pages (from-to)220-235
Number of pages16
JournalInternational Review of Economics and Finance
Publication statusPublished - May 2023


  • European options
  • Lévy processes
  • Monte Carlo method
  • Numerical simulations
  • Stochastic volatility Black and Scholes Formula

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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