Wavelet Method for Pricing Options with Stochastic Volatility
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F46747885%3A24510%2F17%3A00005206" target="_blank" >RIV/46747885:24510/17:00005206 - isvavai.cz</a>
Result on the web
<a href="http://fim2.uhk.cz/mme/index.php?page=conferenceproceedings" target="_blank" >http://fim2.uhk.cz/mme/index.php?page=conferenceproceedings</a>
DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
Wavelet Method for Pricing Options with Stochastic Volatility
Original language description
We use the Heston stochastic volatility model for calculating the theoretical price of an option. While the Black-Scholes model assumes that the volatility of the asset is constant or a deterministic function, the Heston model assumes that the volatility is a random process. The Heston model is represented by a parabolic equation. For its efficient numerical solution, we use the theta scheme for the time discretization and we propose an adaptive wavelet method for the discretization of the equation on the given time level. We construct a piecewise linear wavelet basis and use it in the scheme. The advantage of wavelets is their compression property. It means that the representation of the solution in a wavelet basis requires a small number of coefficients and the computation of the solution can be performed with the small number of parameters. Numerical example is presented for the European put option.
Czech name
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Czech description
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Classification
Type
D - Article in proceedings
CEP classification
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OECD FORD branch
10102 - Applied mathematics
Result continuities
Project
<a href="/en/project/GA16-09541S" target="_blank" >GA16-09541S: Robust numerical schemes for pricing of selected options under various market conditions</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2017
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Article name in the collection
35th International Conference Mathematical Methods in Economics (MME)
ISBN
978-80-7435-678-0
ISSN
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e-ISSN
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Number of pages
6
Pages from-to
96-101
Publisher name
Univerzita Hradec Králové
Place of publication
Hradec Králové
Event location
Hradec Králové
Event date
Jan 1, 2017
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000427151400017