Option price decomposition in spot-dependent volatility models and some applications (Q1794087)
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| Language | Label | Description | Also known as |
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| English | Option price decomposition in spot-dependent volatility models and some applications |
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Option price decomposition in spot-dependent volatility models and some applications (English)
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15 October 2018
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Summary: We obtain a Hull and White type option price decomposition for a general local volatility model. We apply the obtained formula to CEV model. As an application we give an approximated closed formula for the call option price under a CEV model and an approximated short term implied volatility surface. These approximated formulas are used to estimate model parameters. Numerical comparison is performed for our new method with exact and approximated formulas existing in the literature.
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option price decomposition
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local volatility model
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CEV model
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