Modulational Instability of the Coupled Nonlinear volatility and option price model

Abstract

We study the Coupled Nonlinear volatility and option price model via both Modulational instability analysis and direct simulations. Since the coupling term for both the volatility and the option price equation is the same, the MI results are dependent on it, and the stability of the volatility exists for the same condition as that of the price. The numerical simulations are done to comfirm the conditions of MI