Da Fonseca, JCMartini, C2015-03-062015-03-0620142014New Zealand Econometric Study Group held at Hamilton, New Zealand, University of Waikato, 2014-02-20 to 2014-02-21https://hdl.handle.net/10292/8455The aim of this work is to introduce a new stochastic volatility model for equity derivatives. To overcome some of the well-known problems of the Heston model, and more generally of the a ffine models, we defi ne a new specifi cation for the dynamics of the stock and its volatility. Within this framework we develop all the key elements to perform the pricing of vanilla European options as well as of volatility derivatives. We clarify the conditions under which the stock price is a martingale and illustrate how the model can be implemented.NOTICE: this is the author’s version of a work that was accepted for publication. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in (see Citation). The original publication is available at (see Publisher's Version).Equity stochastic volatility ModelsVolatility derivativesEuropean option pricingConference ContributionOpenAccess