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 1

Fingerprint

Stochastic Volatility
Homotopy Analysis Method
Option Pricing
Topology
Barrier Options
Algebraic topology
European Options
Black-Scholes
Convergence Condition
Guess
Homotopy
Costs
Concepts

All Science Journal Classification (ASJC) codes

  • Applied Mathematics

Cite this

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Homotopy analysis method for option pricing under stochastic volatility. / Park, Sang Hyeon; Kim, Jeong Hoon.

In: Applied Mathematics Letters, Vol. 24, No. 10, 01.10.2011, p. 1740-1744.

Research output: Contribution to journalArticle

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