20.3 CEV Model (p456 ds=(r-gSsat +os dz When a =1 we have the black- Scholes case When a> 1 volatility rises as stock price rises hen a< 1 volatility falls as stock price rises Options, Futures, and other Derivatives, 5th edition 2002 by John C. HullOptions, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 20.3 CEV Model (p456) – When a = 1 we have the Black￾Scholes case – When a > 1 volatility rises as stock price rises – When a < 1 volatility falls as stock price rises dS r q Sdt S dz a = ( − ) +