  We introduce a new model of financial market with stochastic volatility
driven by an arbitrary H\"older continuous Gaussian Volterra process. The
distinguishing feature of the model is the form of the volatility equation
which ensures the solution to be ``sandwiched'' between two arbitrary H\"older
continuous functions chosen in advance. We discuss the structure of local
martingale measures on this market, investigate integrability and Malliavin
differentiability of prices and volatilities as well as study absolute
continuity of the corresponding probability laws. Additionally, we utilize
Malliavin calculus to develop an algorithm of pricing options with
discontinuous payoffs.
