PRICING EUROPEAN OPTIONS IN SELECTED STOCHASTIC VOLATILITY MODELS
PRICING EUROPEAN OPTIONS IN SELECTED STOCHASTIC VOLATILITY MODELS
Author(s): Arkadiusz OrzechowskiSubject(s): Business Economy / Management, Political economy, Methodology and research technology, Financial Markets
Published by: Szkoła Główna Gospodarstwa Wiejskiego w Warszawie
Keywords: option pricing; the Heston model; the Bates model; characteristic functions;
Summary/Abstract: In this paper four methods of calculating characteristic functions and their application to selected stochastic volatility models are considered. The methods applied are based on the assumption that the prices of European calls are evaluated numerically by means of the Gauss-Kronrod quadrature. Such approach is used to investigate computational efficiency of pricing European calls. Particular attention in this matter is paid to the speed of generating theoretical prices of the analyzed contracts.
Journal: Metody Ilościowe w Badaniach Ekonomicznych
- Issue Year: XXI/2020
- Issue No: 3
- Page Range: 145 -156
- Page Count: 12
- Language: English