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Calibration of Mult...
Calibration of Multiscale Two-Factor Stochastic Volatility Models: A Second-Order Asymptotic Expansion Approach
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- Betuel, Canhanga (författare)
- Faculty of Sciences, Dept of Mathematics and Computer Sciences, Eduardo Mondlane University, Mozambique
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- Malyarenko, Anatoliy, 1957- (författare)
- Mälardalens högskola,Utbildningsvetenskap och Matematik,MAM
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- Ni, Ying, 1976- (författare)
- Mälardalens högskola,Utbildningsvetenskap och Matematik,MAM
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- Rancic, Milica, 1977- (författare)
- Mälardalens högskola,Utbildningsvetenskap och Matematik,MAM
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- Silvestrov, Sergei, Professor, 1970- (författare)
- Mälardalens högskola,Utbildningsvetenskap och Matematik,MAM
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(creator_code:org_t)
- ISAST: International Society for the Advancement of Science and Technology, 2018
- 2018
- Engelska.
- Relaterad länk:
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http://www.smtda.net...
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https://urn.kb.se/re...
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Abstract
Ämnesord
Stäng
- The development of financial markets imposes more complex models on the option pricing problems. On the previous papers by the authors, we consider a model under which the underlying asset is driven by two independent Heston-type stochastic volatility processes of multiscale (fast and slow) mean-reverting rates and we compute an approximate solution for the option pricing problem, using asymptotic expansion method. In the present paper, we aim to calibrate the model using the market prices of options on Euro Stoxx 50 index and an equity stock in the European market. Our approach is to use the market implied volatility surface for calibrating directly a set of new parameters required in our second-order asymptotic expansion pricing formula for European options. This secondorder asymptotic expansion formula provides a better approximation formula for European option prices than the first-order formula, as explained in an earlier work of the authors.
Ämnesord
- NATURVETENSKAP -- Matematik -- Sannolikhetsteori och statistik (hsv//swe)
- NATURAL SCIENCES -- Mathematics -- Probability Theory and Statistics (hsv//eng)
Nyckelord
- Option pricing model
- asymptotic expansion of option price
- stochastic volatility model
- multiscale stochastic volatility
- calibration
- Mathematics/Applied Mathematics
- matematik/tillämpad matematik
Publikations- och innehållstyp
- ref (ämneskategori)
- kon (ämneskategori)