Homotopy analysis method for option pricing under stochastic volatility

Sang Hyeon Park, Jeong Hoon Kim

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

In this paper, the homotopy analysis method, whose original concept comes from algebraic topology, is applied to connect the Black-Scholes option price (the good initial guess) to the option price under general stochastic volatility environment in a recursive manner. We obtain the homotopy solutions for the European vanilla and barrier options as well as the relevant convergence conditions.

Original languageEnglish
Pages (from-to)1740-1744
Number of pages5
JournalApplied Mathematics Letters
Volume24
Issue number10
DOIs
Publication statusPublished - 2011 Oct

All Science Journal Classification (ASJC) codes

  • Applied Mathematics

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