Article Sidebar
Main Article Content
Two models of pricing European options are presented and compared in this paper, i.e. the Heston model and the double Heston model. As the models belong to the class of stochastic volatility models, particular attention is paid to the way the characteristic functions and their inverse Fourier transforms are determined. The aim of the study is to investigate computational efficiency of pricing European calls. The method applied is based on the assumption that the prices of the derivatives are evaluated by means of Gauss-Kronrod quadrature.
Article Details
Attari M. (2004) Option Pricing Using Fourier Transform: A Numerically Efficient Simplification. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=520042, [access: 20 12.2021]. (Crossref)
Bates D. S. (2006) Maximum Likelihood Estimation of Latent Affine Processes. Review of Financial Studies, 19(3), 909-965. (Crossref)
Black F., Scholes M. (1973) The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81(3), 637-654. (Crossref)
Carr P., Geman H., Madan D. B., Yor M. (2002) The Fine Structure of Asset Returns: An Empirical Investigation. Journal of Business, 75(2), 305-332. (Crossref)
Carr P., Madan D. B. (1999) Option Valuation Using the Fast Fourier Transform. Journal of Computational Finance, 2(4), 61-73. (Crossref)
Christoffersen P., Heston S. L., Jacob K. (2009) The Shape and Term Structure of the Index Option Smirk: Why Multifactor Stochastic Volatility Models Work So Well. Management Science, 55(12), 1914-1932. (Crossref)
Eberlein E., Keller U., Prause K. (1998) New Insights into Smile, Mispricing and Value at Risk: The Hyperbolic Model. Journal of Business, 71(3), 371-405. (Crossref)
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. (Crossref)
Kou S. G. (2002) Jump - Diffusion Model for Option Pricing. Management Science, 48(8), 1086-1101. (Crossref)
Madan D. B., Carr P., Chang E. (1998) The Variance Gamma Process and Option Pricing Model. European Finance Review, 2(1), 79-105. (Crossref)
Madan D. B., Milne F. (1991) Option Pricing with VG Martingale Components, Mathematical Finance, 1(4), 39-55. (Crossref)
Merton R. C. (1976) Option Pricing When Underlying Stock Returns Are Discontinuous, Journal of Financial Economics, 3(1-2), 125-144. (Crossref)
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. (Crossref)
Orzechowski A. (2020) Pricing European Options in Selected Stochastic Volatility Models. Quantitative Methods in Economics, 21(3), 145-156. (Crossref)
Downloads
- Arkadiusz Orzechowski, PRICING EUROPEAN OPTIONS IN THE VARIANCE GAMMA MODEL , Metody Ilościowe w Badaniach Ekonomicznych: Tom 20 Nr 1 (2019)
- Arkadiusz Orzechowski, IS THERE STILL ROOM FOR INCREASING SPEED IN ALGORITHMIC AND HIGH-FREQUENCY TRADING? THE CASE OF EUROPEAN OPTIONS PRICED IN THE HESTON MODEL , Metody Ilościowe w Badaniach Ekonomicznych: Tom 20 Nr 1 (2019)
- Arkadiusz Orzechowski, WYCENA ASYMETRYCZNYCH OPCJI LOGARYTMICZNYCH ZA POMOCĄ TRANSFORMATY FOURIERA , Metody Ilościowe w Badaniach Ekonomicznych: Tom 19 Nr 3 (2018)
- Arkadiusz Orzechowski, PRICING EUROPEAN OPTIONS IN SELECTED STOCHASTIC VOLATILITY MODELS , Metody Ilościowe w Badaniach Ekonomicznych: Tom 21 Nr 3 (2020)
- Arkadiusz Orzechowski, ANALIZA WYCENY OPCJI EUROPEJSKICH W MODELU HULLA – WHITE’A , Metody Ilościowe w Badaniach Ekonomicznych: Tom 17 Nr 3 (2016)
Utwór dostępny jest na licencji Creative Commons Uznanie autorstwa – Użycie niekomercyjne 4.0 Międzynarodowe.
Publikowane artykuły dostępne są na warunkach Open Access na zasadach licencji Creative Commons CC BY-NC – do celów niekomercyjnych udostępnione materiały mogą być kopiowane, drukowane i rozpowszechniane. Autorzy ponoszą opłatę za opublikowanie artykułu.