Two Stochastic Volatility Processes - American Option Pricing

American option pricing under two stochastic volatility processes

American option pricing under stochastic volatility: an efficient numerical approach

This paper develops a new numerical technique to price an American option written upon an underlying asset that follows a bivariate diffusion process. The technique presented here exploits the supermartingale representation of an American option price together with a coarse approximation of its early exercise surface that is based on an efficient implementation of the least-squares Monte–Carlo ...

American option pricing under stochastic volatility: an empirical evaluation

Over the past few years, model complexity in quantitative finance has increased substantially in response to earlier approaches that did not capture critical features for risk management. However, given the preponderance of the classical Black–Scholes model, it is still not clear that this increased complexity is matched by additional accuracy in the ultimate result. In particular, the last dec...

Review of Option Pricing under Stochastic Volatility and Lévy Processes

Long memory stochastic volatility in option pricing

The aim of this paper is to present a stochastic model that accounts for the effects of a long-memory in volatility on option pricing. The starting point is the stochastic Black-Scholes equation involving volatility with long-range dependence. We consider the option price as a sum of classical Black-Scholes price and random deviation describing the risk from the random volatility. By using the ...