Can someone please elaborate what would be the effect of a mean reverting volatility (instead of a constant volatility) in pricing options using BS ? Also how would the greeks vary?

  • $\begingroup$ See this answer here. $\endgroup$ – RRL Nov 18 '18 at 22:51
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    $\begingroup$ If you mean a mean-reverting deterministic volatility (no volatility of volatility) then that still fits within the framework of Black-Scholes and all you have is Black-Scholes with deterministic volatility. But if you mean a mean-reverting stochastic volatility then you have to leave Black-Scholes world and look at Heston model or Schobel-Zhu etc. $\endgroup$ – Frido Rolloos Nov 19 '18 at 2:58