Multivariate asset price dynamics with stochastic covariation

Julian Williams, Christos Ioannidis

    Research output: Contribution to journalArticlepeer-review

    2 Citations (Scopus)


    Stochastic volatility models such as those of Heston (1993)~\cite{Heston100} and Hull and White (1987) ~\cite{Hull101} are often used to model volatility risk in the pricing and hedging of contingent claims on risky assets. Some recent empirical evidence has shown that these models under general specifications often do not fully capture the volatility dynamics observed \emph{in situ}. This paper provides an analytical demonstration of the consequences of multivariate stochastic covariation on the pricing of contingent claims and suggests a hedging strategy for full \emph{delta} neutrality.
    Original languageEnglish
    Pages (from-to)125-134
    Number of pages14
    JournalQuantitative Finance
    Issue number1
    Early online date7 May 2010
    Publication statusPublished - 1 Jan 2011


    • stochastic volatility
    • multivariate
    • quadratic covariation
    • applied mathematical finance
    • asset pricing
    • empirical finance
    • empirical time series analysis


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