Sato two-factor models for multivariate option pricing

This paper provides a multivariate Sato model for multivariate option pricing where the asset log-returns are expressed as Sato time-changed Brownian motions and where the time change is the weighted sum of a common and an idiosyncratic component. The main advantage of this model is that it allows us to replicate univariate option prices in both the strike and time-to-maturity dimensions. In particular, it is able to fit both the univariate option surfaces and the asset log-return dependence structures with high precision for the period from June 2008 to October 2009 - a time frame that includes the credit crisis.