Please use this identifier to cite or link to this item:
http://hdl.handle.net/2445/193771
Title: | Approximate pricing formula to capture leverage effect and stochastic volatility of a financial asset |
Author: | El-Khatib, Youssef Goutte, Stephane Makumbe, Zororo S. Vives i Santa Eulàlia, Josep, 1963- |
Keywords: | Processos estocàstics Sistemes estocàstics Aproximació estocàstica Matemàtica aplicada Stochastic processes Stochastic systems Stochastic approximation Applied mathematics |
Issue Date: | 5-Jan-2022 |
Publisher: | Elsevier |
Abstract: | In this paper we investigate, since both, the theoretical and the empirical point of view, the pricing of European call options under a hybrid CEV-Heston model. CEV-Heston model captures two typical behaviors of financial assets: (i) the leverage effect and (ii) the stochastic volatility. We prove theoretically that the CEV-Heston model covers the leverage-effect and show empirically the volatility clustering property. Then, we utilize a decomposition of the option price to get an approximate formula for European call options. The accuracy of this estimate is compared with the Monte Carlo method. The results show the efficiency of our approximate formula. |
Note: | Versió postprint del document publicat a: https://doi.org/10.1016/j.frl.2021.102072 |
It is part of: | Finance Research Letters, 2022, vol. 44, num. Gener 2022, p. 102072 |
URI: | http://hdl.handle.net/2445/193771 |
Related resource: | https://doi.org/10.1016/j.frl.2021.102072 |
ISSN: | 1544-6123 |
Appears in Collections: | Articles publicats en revistes (Matemàtiques i Informàtica) |
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Document embargat fins el 5-1-2025
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