Numerical Pricing of Options under the Exponential Ornstein-Uhlenbeck Stochastic Volatility Model based on a DG Technique

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dc.contributor.authorHozman, Jiří
dc.contributor.authorTichý, Tomáš
dc.date.accessioned2019-08-16T09:26:20Z
dc.date.available2019-08-16T09:26:20Z
dc.date.issued2018
dc.description.abstractStochastic volatility models are a variance extension of the classical Black-Scholes model dynamics by introducing another auxiliary processes to model the volatility of the underlying asset returns. Here we study the pricing problem for European-style options under a one-factor stochastic volatility model when the volatility of the underlying price is governed by the exponential Ornstein-Uhlenbeck process. The problem can be formulated as a non-stationary second-order degenerate partial differential equation accompanied by initial and boundary conditions, whose analytical solutions are not available in general. Therefore, the approximate option value is obtained by a numerical procedure based on a discontinuous Galerkin technique that provides promising results. Finally, reference numerical experiments are provided with the emphasis on the behaviour of the option values with respect to the discretization parameters.cs
dc.format.extent9 strancs
dc.identifier.doi10.1063/1.5082070
dc.identifier.urihttps://dspace.tul.cz/handle/15240/153223
dc.identifier.urihttps://aip.scitation.org/doi/pdf/10.1063/1.5082070?class=pdf
dc.language.isocscs
dc.relation.ispartofPROCEEDINGS OF THE 44TH INTERNATIONAL CONFERENCE "APPLICATIONS OF MATHEMATICS IN ENGINEERING AND ECONOMICS"
dc.subjectQUADRATIC SPLINE-WAVELETScs
dc.titleNumerical Pricing of Options under the Exponential Ornstein-Uhlenbeck Stochastic Volatility Model based on a DG Techniquecs
dc.typeProceedings Paper
local.article.number30012
local.event.edate2018-06-13
local.event.locationSozopol, BULGARIA
local.event.sdate2018-06-06
local.event.title44th International Conference on Applications of Mathematics in Engineering and Economics
local.identifier.publikace7428
local.identifier.publikace7429
local.relation.volume2048
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