Unifying pricing formula for several stochastic volatility models with jumps
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F49777513%3A23520%2F17%3A43930082" target="_blank" >RIV/49777513:23520/17:43930082 - isvavai.cz</a>
Result on the web
<a href="http://dx.doi.org/10.1002/asmb.2248" target="_blank" >http://dx.doi.org/10.1002/asmb.2248</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1002/asmb.2248" target="_blank" >10.1002/asmb.2248</a>
Alternative languages
Result language
angličtina
Original language name
Unifying pricing formula for several stochastic volatility models with jumps
Original language description
In this paper, we introduce a unifying approach to option pricing under continuous-time stochastic volatility models with jumps. For European style options, a new semi-closed pricing formula is derived using the generalized complex Fourier transform of the corresponding partial integro-differential equation. This approach is successfully applied to models with different volatility diffusion and jump processes. We also discuss how to price options with different payoff functions in a similar way. In particular, we focus on a log-normal and a log-uniform jump diffusion stochastic volatility model, originally introduced by Bates and Yani and Hanson respectively. The comparison of existing and newly proposed option pricing formulas with respect to time-efficiency and precision is discussed. We also derive a representation of an option price under a new approximative fractional jump diffusion model that differs from the aforementioned models, especially for the out-of-the money contracts.
Czech name
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Czech description
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Classification
Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50206 - Finance
Result continuities
Project
<a href="/en/project/GA14-11559S" target="_blank" >GA14-11559S: Analysis of Fractional Stochastic Volatility Models and their Grid Implementation</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
Name of the periodical
Applied Stochastic Models in Business and Industry
ISSN
1526-4025
e-ISSN
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Volume of the periodical
33
Issue of the periodical within the volume
4
Country of publishing house
US - UNITED STATES
Number of pages
21
Pages from-to
422-442
UT code for WoS article
000407654400010
EID of the result in the Scopus database
2-s2.0-85017385020