Pricing vulnerable options under a stochastic volatility model

Sung Jin Yang, Min Ku Lee, Jeong-Hoon Kim

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

In this paper, we consider the pricing of vulnerable options when the underlying asset follows a stochastic volatility model. We use multiscale asymptotic analysis to derive an analytic approximation formula for the price of the vulnerable options and study the stochastic volatility effect on the option price. A numerical experiment result is presented to demonstrate our findings graphically.

Original languageEnglish
Pages (from-to)7-12
Number of pages6
JournalApplied Mathematics Letters
Volume34
Issue number1
DOIs
Publication statusPublished - 2014 Jan 1

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Stochastic Volatility Model
Asymptotic analysis
Option Pricing
Stochastic models
Costs
Stochastic Volatility
Multiscale Analysis
Experiments
Asymptotic Analysis
Pricing
Numerical Experiment
Approximation
Demonstrate

All Science Journal Classification (ASJC) codes

  • Applied Mathematics

Cite this

Yang, Sung Jin ; Lee, Min Ku ; Kim, Jeong-Hoon. / Pricing vulnerable options under a stochastic volatility model. In: Applied Mathematics Letters. 2014 ; Vol. 34, No. 1. pp. 7-12.
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Pricing vulnerable options under a stochastic volatility model. / Yang, Sung Jin; Lee, Min Ku; Kim, Jeong-Hoon.

In: Applied Mathematics Letters, Vol. 34, No. 1, 01.01.2014, p. 7-12.

Research output: Contribution to journalArticle

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