Pricing Vulnerable European Options under Lévy Process with Stochastic Volatility

<div>The effect of long-run mean of stochastic volatility <svg height="12.4698pt" id="M165" style="vertical-align:-3.18147pt" version="1.1" viewbox="-0.0498162 -9.28833 11.2181 12.4698" width="11.2181pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M475 507C475 612 440 712 326 712C139 712 23 420 23 215C23 96 58 -12 180 -12C369 -12 475 293 475 507ZM391 522C391 486 387 448 379 394H126C155 538 222 677 310 677C386 677 391 571 391 522ZM373 346C344 193 283 22 189 22C126 22 106 114 106 196C106 243 111 293 118 346H373Z"></path></g><g transform="matrix(.0091,0,0,-0.0091,6.149,3.132)"><path d="M389 0V32C297 38 291 46 291 118V635C234 613 175 595 109 583V556L161 554C203 552 207 547 207 497V118C207 46 201 38 110 32V0H389Z"></path></g></svg> on the option prices.</div>

Discrete Dynamics in Nature and Society

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Figure 2

Figure 2: Pricing Vulnerable European Options under Lévy Process with Stochastic Volatility 