Every professional option trader knows that volatility not is constant but stochastic! Have you ever wanted a Practical stochastic volatility model with mean reversion. Here it is!


Even if I have done my best at developing and testing this very complex model, I can give no guarantees that it will work in all markets at all times! . My personal experience is that this model works best for global high volume arbitrage trading. I am currently working at calibrating it to the volatility smile! (if you think this model looks more deterministic than stochastic you probably have a computer virus that interfere with the underlying Winer process). If you ever should use this model it is at your own Risk!


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