In mathematical finance, the CEV or constant elasticity of variance model is a stochastic volatility model, although technically it would be classed more precisely as a local volatility model, that attempts to capture stochastic volatility and the leverage effect. The model is widely used by practitioners in the financial industry, especially for modelling equities and commodities. It was developed by John Cox in 1975.[1]
- ^ Cox, J. "Notes on Option Pricing I: Constant Elasticity of Diffusions." Unpublished draft, Stanford University, 1975.