Multi-Scale Stochastic Volatility

In this talk I will present the approach to pricing and hedging under stochastic volatility developed in our recent work (Fouque-Papanicolaou-Sircar-Solna). The emphasis will be put on the order of accuracy of the approximation (Singular Perturbations in Option Pricing, to appear in the SIAM Journal on Applied Mathematics), and on an application to variance reduction in Monte Carlo computations (Fouque-Tullie, Quantitative Finance (2), 2002).