ANALYTICAL COMPARISONS OF OPTION PRICES IN STOCHASTIC VOLATILITY MODELS
نویسندگان
چکیده
منابع مشابه
Analytical Comparisons of Option prices in Stochastic Volatility Models
This paper gives an ordering on option prices under various well known martingale measures in an incomplete stochastic volatility model. Our central result is a comparison theorem which proves convex option prices are decreasing in the market price of volatility risk, the parameter governing the choice of pricing measure. The theorem is applied to order option prices under q-optimal pricing mea...
متن کاملThe evaluation of barrier option prices under stochastic volatility
This paper considers the problem of evaluating barrier option prices when the dynamics of the underlying are driven by stochastic volatility following the square root process of Heston (1993). We develop a method of lines approach as it conveniently delivers not only the price, but also the delta and gamma of the option. The method is able to efficiently handle both continuously monitored and d...
متن کاملSpectral Decomposition of Option Prices in Fast Mean-Reverting Stochastic Volatility Models
Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in order to demonstrate the versatility of our method. These include: European options, up-and-out options, double-barrier knock-out options, and options which...
متن کاملA Control Variate Method to Evaluate Option Prices under Multi-factor Stochastic Volatility Models
We propose a control variate method with multiple controls to effectively reduce variances of Monte Carlo simulations for pricing European options under multifactor stochastic volatility models. Based on an application of Ito’s formula, the option price is decomposed by its discounted payoff and stochastic integrals with the appearance of gradients of the unknown option price with respect to st...
متن کاملVariance Reduction for Monte Carlo Methods to Evaluate Option Prices under Multi-factor Stochastic Volatility Models
We present variance reduction methods for Monte Carlo simulations to evaluate European and Asian options in the context of multiscale stochastic volatility models. European option price approximations, obtained from singular and regular perturbation analysis [J.P. Fouque, G. Papanicolaou, R. Sircar and K. Solna: Multiscale Stochastic Volatility Asymptotics, SIAM Journal on Multiscale Modeling a...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Mathematical Finance
سال: 2005
ISSN: 0960-1627,1467-9965
DOI: 10.1111/j.0960-1627.2005.00210.x