Stochastic Variance Of Volatility Model

The paper introduced the stochastic variance of volatility in the pricing derivatives on realized variance based on the basic Toy's model. Two models including Toy-Heston model and Toy-SABR model were introduced and solved for the closed form solutions. Matlab codes were constructed for the purpose of test. Through empirical test it compares the pros and cons of both models, and discussed about the possible application field as well as the potential improvement methods.