کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
482717 | 1446146 | 2009 | 9 صفحه PDF | دانلود رایگان |
![عکس صفحه اول مقاله: Option pricing with mean reversion and stochastic volatility Option pricing with mean reversion and stochastic volatility](/preview/png/482717.png)
Many underlying assets of option contracts, such as currencies, commodities, energy, temperature and even some stocks, exhibit both mean reversion and stochastic volatility. This paper investigates the valuation of options when the underlying asset follows a mean-reverting lognormal process with stochastic volatility. A closed-form solution is derived for European options by means of Fourier transform. The proposed model allows the option pricing formula to capture both the term structure of futures prices and the market implied volatility smile within a unified framework. A bivariate trinomial lattice approach is introduced to value path-dependent options with the proposed model. Numerical examples using European options, American options and barrier options demonstrate the use of the model and the quality of the numerical scheme.
Journal: European Journal of Operational Research - Volume 197, Issue 1, 16 August 2009, Pages 179–187