Lattice methods for pricing American strangles with two-dimensional stochastic volatility models

DOI10.1155/2014/165259MaRDI QIDQ2320671zbMATH OpenOpenAlexWikidataFDO

Authors Xuemei Gao, Dongya Deng, Yue Shan

Publication date 23 August 2019

Published in Discrete Dynamics in Nature and Society (Search for Journal in Brave)

Copyright license Creative Commons Attribution 3.0 Unported

Full work available at URL https://doi.org/10.1155/2014/165259

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60)

Review text

Summary: The aim of this paper is to extend the lattice method proposed by \textit{P. Ritchken} and \textit{R. Trevor} [``Pricing options under generalized GARCH and stochastic volatility processes, J. Finance 54, No. 1, 377--402 (1999; \url{doi:10.1111/0022-1082.00109})] for pricing American options with one-dimensional stochastic volatility models to the two-dimensional cases with strangle payoff. This proposed method is compared with the least square Monte-Carlo method via numerical examples.

Recommendations

• American stochastic volatility call option pricing: a lattice based approach
• A lattice method for option pricing with two underlying assets in the regime-switching model
• Evaluation of American strangles
• Laplace transform method for pricing American CEV strangles option with two free boundaries
• Pricing volatility options via the lattice algorithm

Cites work

• A closed-form solution for options with stochastic volatility with applications to bond and currency options
• Adaptive lattice methods for multi-asset models
• An Improved Binomial Lattice Method for Multi‐Dimensional Options
• Approximating stochastic volatility by recombinant trees
• Evaluation of American strangles
• Measuring and forecasting volatility in Chinese stock market using HAR-CJ-M model
• THE GARCH OPTION PRICING MODEL

Cited in

(1)

• American stochastic volatility call option pricing: a lattice based approach

This page was built for publication: Lattice methods for pricing American strangles with two-dimensional stochastic volatility models

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2320671)