{"paper":{"title":"Synthetic American Option Pricing via Jump-HMM-Driven Heston Implied Volatility","license":"http://creativecommons.org/licenses/by/4.0/","headline":"A structural equity model generates implied volatility surfaces to price synthetic American options without market calibration.","cross_cats":["cs.LG"],"primary_cat":"q-fin.CP","authors_text":"Jeffrey D. Varner, Jiawei Zhang, Julia Sun, Zheyu Jin","submitted_at":"2026-05-13T18:07:14Z","abstract_excerpt":"Generating realistic synthetic option prices requires implied volatility as an input, yet implied volatility is itself derived from observed option prices, creating a circular dependency that limits synthetic data for machine-learning and risk-analysis applications. We break this circularity with a pipeline in which implied volatility emerges as an output of a structural model of equity returns. A Jump Hidden Markov Model produces multi-asset price paths with realistic stylized facts and cross-asset tail dependence; a modified Heston variance process, whose mean-reversion target depends on reg"},"claims":{"count":4,"items":[{"kind":"strongest_claim","text":"We break this circularity with a pipeline in which implied volatility emerges as an output of a structural model of equity returns.","source":"verdict.strongest_claim","status":"machine_extracted","claim_id":"C1","attestation":"unclaimed"},{"kind":"weakest_assumption","text":"The modified Heston variance process with regime-, expiration-, moneyness-, and mood-dependent mean-reversion target, when initialized at that target, produces realistic implied volatility surfaces that generalize beyond the calibration data.","source":"verdict.weakest_assumption","status":"machine_extracted","claim_id":"C2","attestation":"unclaimed"},{"kind":"one_line_summary","text":"A Jump-HMM-driven modified Heston model generates synthetic implied volatility surfaces and American option prices directly from simulated equity return paths, breaking the circular dependency on market-derived volatility.","source":"verdict.one_line_summary","status":"machine_extracted","claim_id":"C3","attestation":"unclaimed"},{"kind":"headline","text":"A structural equity model generates implied volatility surfaces to price synthetic American options without market calibration.","source":"verdict.pith_extraction.headline","status":"machine_extracted","claim_id":"C4","attestation":"unclaimed"}],"snapshot_sha256":"78d73181c653c56640d44a64c86375b217abfdd3e4c642b3eb89bfd25d9fc2da"},"source":{"id":"2605.13998","kind":"arxiv","version":1},"verdict":{"id":"59bb7686-b9a8-4cc0-9071-9cda069c0011","model_set":{"reader":"grok-4.3"},"created_at":"2026-05-15T02:25:38.857877Z","strongest_claim":"We break this circularity with a pipeline in which implied volatility emerges as an output of a structural model of equity returns.","one_line_summary":"A Jump-HMM-driven modified Heston model generates synthetic implied volatility surfaces and American option prices directly from simulated equity return paths, breaking the circular dependency on market-derived volatility.","pipeline_version":"pith-pipeline@v0.9.0","weakest_assumption":"The modified Heston variance process with regime-, expiration-, moneyness-, and mood-dependent mean-reversion target, when initialized at that target, produces realistic implied volatility surfaces that generalize beyond the calibration data.","pith_extraction_headline":"A structural equity model generates implied volatility surfaces to price synthetic American options without market calibration."},"references":{"count":21,"sample":[{"doi":"","year":1993,"title":"The Review of Financial Studies , volume=","work_id":"1ea0bb7f-486d-42ea-b916-2f2cf1972dc9","ref_index":1,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":1979,"title":"Journal of Financial Economics , volume=","work_id":"b1fcc933-803f-4be2-b767-908b3f5e8bd1","ref_index":2,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":null,"title":"arXiv preprint arXiv:2603.10202 , year=","work_id":"d8c8a9fa-0e24-4042-84af-8106e59aedd1","ref_index":3,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":2008,"title":"Simple and efficient simulation of the","work_id":"5178118f-9a9d-4276-a1b7-7ac6ecb5b6bf","ref_index":4,"cited_arxiv_id":"","is_internal_anchor":false},{"doi":"","year":null,"title":"A parsimonious arbitrage-free implied volatility parameterization with application to the valuation of volatility derivatives , author=","work_id":"c2dfb368-9856-42b8-a5d2-044adce76451","ref_index":5,"cited_arxiv_id":"","is_internal_anchor":false}],"resolved_work":21,"snapshot_sha256":"b0eebda064e2bf951c5cc53f94c7f4fe847538ff87535a7c7f9ceeb78a48d762","internal_anchors":1},"formal_canon":{"evidence_count":2,"snapshot_sha256":"f2bcc5aba2cc000936dcee9ffbdfafd60fc4804d95f3b254f43fcd00219932c5"},"author_claims":{"count":0,"strong_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"builder_version":"pith-number-builder-2026-05-17-v1"}