I wrote my bachelor thesis about European Option Pricing under Stochastic Volatility and Jump Diffusion and am now near the end of my MSc in Quant Finance. As i want to write a "potential job"-oriented master's thesis I wanted to hear some advice. So maybe a pretty "dumb" question: do practitioners use for instance stochastic volatility jump diffusion models? And are Derivatives/Structured Products priced mainly via Monte Carlo (using variance reduction techniques and assuming there are no closed form solutions available) or do banks employ more complicated techniques like fast fourier transform? Can anyone share a practical insight?

Best regards


stochastic vol and Levy process models are popular. Jump diffusion less so.

FT techniques are definitely used.

These days most of the focus is on valuation adjustments for vanilla products rather than how to price structured products. It tends to use both MC and lattice methods. If you want to be topical, I'd advise something related to valuation adjustments.


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