scholarly journals An analytical approximation formula for European option pricing under a new stochastic volatility model with regime-switching

2016 ◽  
Vol 71 ◽  
pp. 77-85 ◽  
Author(s):  
Xin-Jiang He ◽  
Song-Ping Zhu
Keyword(s):  
Option Pricing ◽  
Stochastic Volatility ◽  
Regime Switching ◽  
Analytical Approximation ◽  
Stochastic Volatility Model ◽  
Approximation Formula ◽  
European Option ◽  
European Option Pricing ◽  
Volatility Model

scholarly journals European Option Pricing under Wishart Processes

2021 ◽  
Vol 2021 ◽  
pp. 1-24
Author(s):  
Raphael Naryongo ◽  
Philip Ngare ◽  
Anthony Waititu
Keyword(s):  
Option Pricing ◽  
Market Price ◽  
Stochastic Volatility Model ◽  
European Option ◽  
Multifactor Model ◽  
Asset Pricing Model ◽  
European Option Pricing ◽  
Volatility Model ◽  
Wishart Processes ◽  
The Fourier Transform

This study deals with a single risky asset pricing model whose volatility is described by Wishart affine processes. This multifactor model with two dependency matrices describing the correlation between the asset dynamic and Wishart processes makes it more flexible enough to fit the market data for short or long maturities. The aim of the study is to derive and solve the call option pricing problem under the double Wishart stochastic volatility model. The Fourier transform techniques combined with perturbation methods are employed in order to price the European call options. The numerical illustrations on pricing predictions show similar behavior of price movements under the double Wishart model with respect to the market price.

scholarly journals Option pricing in a regime switching stochastic volatility model

2018 ◽  
Vol 138 ◽  
pp. 116-126 ◽  
Author(s):  
Arunangshu Biswas ◽  
Anindya Goswami ◽  
Ludger Overbeck
Keyword(s):  
Option Pricing ◽  
Stochastic Volatility ◽  
Regime Switching ◽  
Stochastic Volatility Model ◽  
Volatility Model

scholarly journals Pricing Collar Options with Stochastic Volatility

2017 ◽  
Vol 2017 ◽  
pp. 1-7 ◽  
Author(s):  
Pengshi Li ◽  
Jianhui Yang
Keyword(s):  
Brownian Motion ◽  
Numerical Experiment ◽  
Stochastic Volatility ◽  
Asset Price ◽  
Analytical Approximation ◽  
Stochastic Volatility Model ◽  
Approximation Formula ◽  
Underlying Asset ◽  
Volatility Model ◽  
Mean Reverting Process

This paper studies collar options in a stochastic volatility economy. The underlying asset price is assumed to follow a continuous geometric Brownian motion with stochastic volatility driven by a mean-reverting process. The method of asymptotic analysis is employed to solve the PDE in the stochastic volatility model. An analytical approximation formula for the price of the collar option is derived. A numerical experiment is presented to demonstrate the results.

Pricing volatility swaps in the Heston’s stochastic volatility model with regime switching: A saddlepoint approximation method

2016 ◽  
Vol 03 (04) ◽  
pp. 1650030
Author(s):  
Mengzhe Zhang ◽  
Leunglung Chan
Keyword(s):  
Stochastic Volatility ◽  
Approximation Method ◽  
Regime Switching ◽  
Saddlepoint Approximation ◽  
Stochastic Volatility Model ◽  
Approximation Formula ◽  
Chain Process ◽  
Volatility Model ◽  
Highly Nonlinear ◽  
The Given

Pricing a volatility swap is a highly nonlinear problem. Explicit solutions of the prices of volatility swaps are notoriously difficult to find. In this paper, we consider a saddlepoint approximation method for the valuation of a volatility swap under the Heston’s stochastic volatility model with regime switching. All the values of key parameters in our model are supposed to depend on the states of a continuous time observable Markov chain process. We present a closed-form exact cumulant generating functions (CGFs) of the continuous realized variance. Additionally, an approximated CGF is given. Then we approximate the volatility swaps by the saddlepoint approximation formula which derived from the Fourier inversion representation. The numerical results suggest that the alternative saddlepoint approximation method (ASAP) and the approximated ASAP method could both produce fairly accurate results for the given range of maturities.

Option pricing under the fractional stochastic volatility model

2021 ◽  
Vol 63 ◽  
pp. 123-142
Author(s):  
Yuecai Han ◽  
Zheng Li ◽  
Chunyang Liu
Keyword(s):  
Brownian Motion ◽  
Option Pricing ◽  
Fractional Brownian Motion ◽  
Stochastic Volatility ◽  
Option Price ◽  
Stochastic Volatility Model ◽  
Option Prices ◽  
European Call Option ◽  
Volatility Model ◽  
The Impact

We investigate the European call option pricing problem under the fractional stochastic volatility model. The stochastic volatility model is driven by both fractional Brownian motion and standard Brownian motion. We obtain an analytical solution of the European option price via the Itô’s formula for fractional Brownian motion, Malliavin calculus, derivative replication and the fundamental solution method. Some numerical simulations are given to illustrate the impact of parameters on option prices, and the results of comparison with other models are presented. doi:10.1017/S1446181121000225

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