Algebraic solution of the Stein-Stein model for stochastic volatility

摘要

We provide an algebraic approach to the solution of the Stein-Stein model for stochastic volatility which arises in the determination of the Radon-Nikodym density of the minimal entropy of the martingale measure. We extend our investigation to the case in which the parameters of the model are time-dependent. Our algorithmic approach obviates the need for Ansatze for the structure of the solution.