FFT based option pricing under a mean reverting process with stochastic volatility and jumps

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS

卷:235

Article

Pillay, E.²  O'Hara, J. G.¹ 

[1] Univ Essex, Ctr Computat Finance & Econ Agents, Colchester CO4 3SQ, Essex, England

[2] Univ KwaZulu Natal, Sch Stat & Actuarial Sci, ZA-4000 Durban, South Africa

关键词: Mean reverting process;    Stochastic volatility;    Jumps;    Fast Fourier transform;    Monte Carlo simulation;   

DOI  :  10.1016/j.cam.2010.10.024

来源: Elsevier

【 摘 要 】

Numerous studies present strong empirical evidence that certain financial assets may exhibit mean reversion, stochastic volatility or jumps. This paper explores the valuation of European options when the underlying asset follows a mean reverting log-normal process with stochastic volatility and jumps. A closed form representation of the characteristic function of the process is derived for the computation of European option prices via the fast Fourier transform. (C) 2010 Elsevier B.V. All rights reserved.

【 授权许可】

Free