Abstract
In general, the pricing problems of exotic options in finance do not have analytic solutions under stochastic volatility and so it is hard to compute the option prices or at least it requires much of time to compute them. This paper investigates a semi-analytic pricing method for lookback options in a general stochastic volatility framework. The resultant formula is well connected to the Black-Scholes price that is the first term of a series expansion, which makes computing the option prices relatively efficient. Further, a convergence condition for the expansion is provided with an error bound.
| Original language | English |
|---|---|
| Pages (from-to) | 2537-2543 |
| Number of pages | 7 |
| Journal | Statistics and Probability Letters |
| Volume | 83 |
| Issue number | 11 |
| DOIs | |
| Publication status | Published - 2013 Nov 1 |
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All Science Journal Classification (ASJC) codes
- Statistics and Probability
- Statistics, Probability and Uncertainty
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A semi-analytic pricing formula for lookback options under a general stochastic volatility model. / Park, Sang Hyeon; Kim, Jeong-Hoon.
In: Statistics and Probability Letters, Vol. 83, No. 11, 01.11.2013, p. 2537-2543.Research output: Contribution to journal › Article
TY - JOUR
T1 - A semi-analytic pricing formula for lookback options under a general stochastic volatility model
AU - Park, Sang Hyeon
AU - Kim, Jeong-Hoon
PY - 2013/11/1
Y1 - 2013/11/1
N2 - In general, the pricing problems of exotic options in finance do not have analytic solutions under stochastic volatility and so it is hard to compute the option prices or at least it requires much of time to compute them. This paper investigates a semi-analytic pricing method for lookback options in a general stochastic volatility framework. The resultant formula is well connected to the Black-Scholes price that is the first term of a series expansion, which makes computing the option prices relatively efficient. Further, a convergence condition for the expansion is provided with an error bound.
AB - In general, the pricing problems of exotic options in finance do not have analytic solutions under stochastic volatility and so it is hard to compute the option prices or at least it requires much of time to compute them. This paper investigates a semi-analytic pricing method for lookback options in a general stochastic volatility framework. The resultant formula is well connected to the Black-Scholes price that is the first term of a series expansion, which makes computing the option prices relatively efficient. Further, a convergence condition for the expansion is provided with an error bound.
UR - http://www.scopus.com/inward/record.url?scp=84883186572&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84883186572&partnerID=8YFLogxK
U2 - 10.1016/j.spl.2013.08.002
DO - 10.1016/j.spl.2013.08.002
M3 - Article
AN - SCOPUS:84883186572
VL - 83
SP - 2537
EP - 2543
JO - Statistics and Probability Letters
JF - Statistics and Probability Letters
SN - 0167-7152
IS - 11
ER -