Numerical stability of a hybrid method for pricing options
| Autor: | Lucia Caramellino, Antonino Zanette, Maya Briani, Giulia Terenzi |
|---|---|
| Přispěvatelé: | Istituto per le Applicazioni del Calcolo 'Mauro Picone' (IAC), Consiglio Nazionale delle Ricerche [Roma] (CNR), Dipartimento di Matematica [Rome], Università degli Studi di Roma Tor Vergata [Roma], Laboratoire d'Analyse et de Mathématiques Appliquées (LAMA), Université Paris-Est Marne-la-Vallée (UPEM)-Fédération de Recherche Bézout-Université Paris-Est Créteil Val-de-Marne - Paris 12 (UPEC UP12)-Centre National de la Recherche Scientifique (CNRS), Mathematical Risk Handling (MATHRISK), Université Paris-Est Marne-la-Vallée (UPEM)-École des Ponts ParisTech (ENPC)-Inria de Paris, Institut National de Recherche en Informatique et en Automatique (Inria)-Institut National de Recherche en Informatique et en Automatique (Inria), Centre National de la Recherche Scientifique (CNRS)-Université Paris-Est Créteil Val-de-Marne - Paris 12 (UPEC UP12)-Fédération de Recherche Bézout-Université Paris-Est Marne-la-Vallée (UPEM), Inria de Paris, Institut National de Recherche en Informatique et en Automatique (Inria)-Institut National de Recherche en Informatique et en Automatique (Inria)-École des Ponts ParisTech (ENPC)-Université Paris-Est Marne-la-Vallée (UPEM), National Research Council of Italy | Consiglio Nazionale delle Ricerche (CNR) |
| Jazyk: | angličtina |
| Rok vydání: | 2019 |
| Předmět: |
Mathematical optimization
Computer science media_common.quotation_subject Computational Finance (q-fin.CP) 01 natural sciences FOS: Economics and business 010104 statistics & probability Quantitative Finance - Computational Finance 0502 economics and business Jump model Stochastic volatility 0101 mathematics Tree methods media_common 050208 finance stochastic volatility jump-diffusion process European and American options tree methods finite-difference numerical stability 05 social sciences Numerical stability Type scheme Interest rate Settore MAT/06 - Probabilita' e Statistica Matematica Finite-difference [MATH.MATH-PR]Mathematics [math]/Probability [math.PR] Jump-diffusion process Binomial options pricing model Volatility (finance) General Economics Econometrics and Finance 2000 MSC:91G10 60H30 65C20 Finance |
| Zdroj: | International Journal of Theoretical and Applied Finance International Journal of Theoretical and Applied Finance, World Scientific Publishing, 2019, pp.1950036. ⟨10.1142/S0219024919500365⟩ International journal of theoretical and applied finance (2019). doi:10.1142/S0219024919500365 info:cnr-pdr/source/autori:Briani M.; Caramellino L.; Terenzi G.; Zanette A./titolo:NUMERICAL STABILITY of A HYBRID METHOD for PRICING OPTIONS/doi:10.1142%2FS0219024919500365/rivista:International journal of theoretical and applied finance/anno:2019/pagina_da:/pagina_a:/intervallo_pagine:/volume International Journal of Theoretical and Applied Finance, 2019, pp.1950036. ⟨10.1142/S0219024919500365⟩ |
| ISSN: | 0219-0249 |
| DOI: | 10.1142/S0219024919500365⟩ |
| Popis: | We develop and study stability properties of a hybrid approximation of functionals of the Bates jump model with stochastic interest rate that uses a tree method in the direction of the volatility and the interest rate and a finite-difference approach in order to handle the underlying asset price process. We also propose hybrid simulations for the model, following a binomial tree in the direction of both the volatility and the interest rate, and a space-continuous approximation for the underlying asset price process coming from a Euler-Maruyama type scheme. We show that our methods allow to obtain efficient and accurate European and American option prices. Numerical experiments are provided, and show the reliability and the efficiency of the algorithms. Comment: arXiv admin note: text overlap with arXiv:1503.03705 |
| Databáze: | OpenAIRE |
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