Approximate Analytical Pricing of European Options under the Non-affine Stochastic Volatility Model
| العنوان: | Approximate Analytical Pricing of European Options under the Non-affine Stochastic Volatility Model |
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| المؤلفون: | Youfa Sun, Yuhang Yao, Xingyin Liang |
| المصدر: | Journal of Physics: Conference Series. 1624:022032 |
| بيانات النشر: | IOP Publishing, 2020. |
| سنة النشر: | 2020 |
| مصطلحات موضوعية: | History, Stochastic volatility, Econometrics, Affine transformation, Computer Science Applications, Education, Mathematics |
| الوصف: | The non-affine stochastic volatility model has attracted increasing attention in recent years, due to its excellent performance in describing the nonlinear characteristics of asset price path. However, the fact that there is no close-form of option pricing formula under this model, restricts its use badly. To remove this restriction, two approximate analytical option pricing approaches are proposed in this paper, that is, the piecewise first-order Taylor expansion method and the perturbation-based asymptotic expansion method of implied volatility. The first method is used to derive an approximate characteristic function, then based on which the Fourier-Cosine expansion method calculates the European option price. In the second way, implied volatility of the European option price is asymptotically expanded around non-affine term of volatility. Compared with the existing methods in literature, numerical experiments show that the first method has higher accuracy, while the second method is of more practical significance. In addition, the accuracy of the first method is generally higher than that of the second method in most cases, while the second method performs better when the volatility is extremely small. |
| تدمد: | 1742-6596 1742-6588 |
| DOI: | 10.1088/1742-6596/1624/2/022032 |
| URL الوصول: | https://explore.openaire.eu/search/publication?articleId=doi_________::79181c1fbe52c334535ff94b4d8cf2f2 https://doi.org/10.1088/1742-6596/1624/2/022032 |
| Rights: | OPEN |
| رقم الانضمام: | edsair.doi...........79181c1fbe52c334535ff94b4d8cf2f2 |
| قاعدة البيانات: | OpenAIRE |
| تدمد: | 17426596 17426588 |
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| DOI: | 10.1088/1742-6596/1624/2/022032 |