New pricing model revolutionizes options market accuracy and efficiency.
The article discusses how traditional pricing models for options don't accurately reflect market prices. Researchers have developed a new model called "stochastic-local volatility" that combines elements of two existing models to better fit option prices. By adjusting the volatility in the model, they were able to match the volatility surface more closely. This new model addresses limitations of previous models and provides a more accurate representation of option prices in the market.