Stochastic Volatility Modeling

by Lorenzo Bergomi

Packed with insights, Lorenzo Bergomi’s Stochastic Volatility Modeling explains how stochastic volatility is used to address issues arising in the modeling of derivatives, This manual covers the practicalities of modeling local volatility, stochastic volatility, local-stochastic volatility, and multi-asset stochastic volatility. In the course of this exploration, the author, Risk ’s 2009 Quant of the Year and a leading contributor to volatility modeling, draws on his experience as head quant in Société Générale’s equity derivatives division. Clear and straightforward, the book takes readers through various modeling challenges, all originating in actual trading/hedging issues, with a focus on the practical consequences of modeling choices.

522 pages, Hardcover

First published February 15, 2016

Reviews

[Nicolas · Rating 5 out of 5]

This book is a masterpiece! It’s undoubtedly the best book I’ve read in the financial derivatives world.

I found it very valuable because it’s not just about the actual models/results it details - and there are many - but it’s about the author actually laying down his train of thought and sharing many tips along the way. This gives the reader a solid and complex framework on how to evaluate a derivatives model. In other words, the author shares his tools and wisdom on how to think about a model through this book.

A piece of advice though: The author did not dumb down this complicated topic so it’s a hard read and one of those books that take a bit of time to sink in. Good luck!

[Juraj Spilda · Rating 3 out of 5]

Started off instructive, later chapters deteriorated into feeling like a set of consecutive technical reports with more limited educational value.

[Jovany Agathe · Rating 5 out of 5]

An excellent book to better understand both local and stochastic volatility models with relevant case studies.
Strengths and weaknesses of the local volatility model are described in detail using concrete examples
Each chapter ends with a synthetic overview which helps the reader to remind all the key points of the book.