PRICING EUROPEAN OPTIONS IN SELECTED STOCHASTIC VOLATILITY MODELS

Main Article Content

Arkadiusz Orzechowski


Słowa kluczowe : option pricing, the Heston model, the Bates model, characteristic functions
Abstrakt
In this paper four methods of calculating characteristic functions and their application to selected stochastic volatility models are considered. The methods applied are based on the assumption that the prices of European calls are evaluated numerically by means of the Gauss-Kronrod quadrature. Such approach is used to investigate computational efficiency of pricing European calls. Particular attention in this matter is paid to the speed of generating theoretical prices of the analyzed contracts.

Article Details

Jak cytować
Orzechowski, A. (2020). PRICING EUROPEAN OPTIONS IN SELECTED STOCHASTIC VOLATILITY MODELS. Metody Ilościowe W Badaniach Ekonomicznych, 21(3), 145–156. https://doi.org/10.22630/MIBE.2020.21.3.14
Bibliografia

Attari M. (2004) Option Pricing Using Fourier Transform: A Numerically Efficient Simplification. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=520042, [dostęp: 20 12.2020].

Bates D. S. (1996) Jumps and Stochastic Volatility: Exchange Rate Process Implicit in Deutsche Mark Option, The Review of Financial Studies, 9(1), 69-107.

Bates D. S. (2006) Maximum Likelihood Estimation of Latent Affine Processes, Review of Financial Studies, 19(3). 909-965.

Black F., Scholes M. (1973) The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81(3), 637-654.

Challet D., Marsili M., Zhang Y. -C. (2001) Stylized Facts of Financial Markets and Market Crashes in Minority Games, Physica A: Statistical Mechanics and Its Applications, 294(3-4), 514-524.

Carr P., Madan D. B. (1999) Option Valuation Using the Fast Fourier Transform. Journal 34 of Computational Finance, 2(4), 61-73.

Cont R. (2001) Empirical Properties of Asset Returns: Stylized Facts and Statistical Issues, Quantitative Finance, 1(2), 223-236.

Heston S. (1993) A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options. The Review of Financial Studies, 6(2), 327-343.

Lux T. (2009) Stochastic Behavioral Asset - Pricing Models and the Stylized Facts, [in:] T. Hens, K. R. Schenk-Hopp (Ed.), Handbook of Financial Markets: Dynamics and Evolution, North-Holland, Amsterdam, The Netherlands.

Orzechowski A. (2018) Pricing Correlation Options: from the P. Carr and D. Madan Approach to the New Method Based on the Fourier Transform. Economics and Business Review, 4(1), 16-28.

Rogers L. C. G., Zhang L. (2011) Understanding Asset Returns. Mathematics and Financial Economics, 5(2), 101-119.

Taylor S. J. (2005) Asset Price Dynamics, Volatility and Prediction. Princeton University Press, Princeton, USA.

Statystyki

Downloads

Download data is not yet available.