Exact simulation of the 3/2 model
From MaRDI portal
Publication:3166709
DOI10.1142/S021902491250032XzbMATH Open1262.91114arXiv1105.3297MaRDI QIDQ3166709FDOQ3166709
Authors: Jan Baldeaux 
Publication date: 15 October 2012
Published in: International Journal of Theoretical and Applied Finance (Search for Journal in Brave)
Abstract: This paper discusses the exact simulation of the stock price process underlying the 3/2 model. Using a result derived by Craddock and Lennox using Lie Symmetry Analysis, we adapt the Broadie-Kaya algorithm for the simulation of affine processes to the 3/2 model. We also discuss variance reduction techniques and find that conditional Monte Carlo techniques combined with quasi-Monte Carlo point sets result in significant variance reductions.
Full work available at URL: https://arxiv.org/abs/1105.3297
Recommendations
Cites Work
- Algorithm 823
- A closed-form solution for options with stochastic volatility with applications to bond and currency options
- Retrospective exact simulation of diffusion sample paths with applications
- Monte Carlo Variance of Scrambled Net Quadrature
- Multilevel Monte Carlo Path Simulation
- Title not available (Why is that?)
- Pricing swaps and options on quadratic variation under stochastic time change models -- discrete observations case
- Mathematical methods for financial markets.
- Exact simulation of diffusions
- Infinite-dimensional quadrature and approximation of distributions
- A factorisation of diffusion measure and finite sample path constructions
- Efficient Monte Carlo simulation of security prices
- A new approach for option pricing under stochastic volatility
- Exact Simulation of Stochastic Volatility and Other Affine Jump Diffusion Processes
- The calculation of expectations for classes of diffusion processes by Lie symmetry methods
- Variance reduction via lattice rules
- Lie group symmetries as integral transforms of fundamental solutions
- Gamma expansion of the Heston stochastic volatility model
- CLOSED FORM SOLUTIONS FOR QUADRATIC AND INVERSE QUADRATIC TERM STRUCTURE MODELS
Cited In (15)
- Saddlepoint approximation methods for pricing derivatives on discrete realized variance
- A transform-based method for pricing Asian options under general two-dimensional models
- Exact simulation of the Hull and White stochastic volatility model
- The mean-reverting 4/2 stochastic volatility model: properties and financial applications
- Analytical solvability and exact simulation in models with affine stochastic volatility and Lévy jumps
- Pricing ratchet equity index annuity with mortality risk by complex Fourier series method
- Pricing timer options and variance derivatives with closed-form partial transform under the 3/2 model
- Efficient simulation of generalized SABR and stochastic local volatility models based on Markov chain approximations
- Recursive algorithms for pricing discrete variance options and volatility swaps under time-changed Lévy processes
- Regression-based Monte Carlo methods for stochastic control models: variable annuities with lifelong guarantees
- European option pricing under the log mean-reverting jump diffusion stochastic volatility model
- Exact simulation of the multifactor Ornstein-Uhlenbeck driven stochastic volatility model
- An analysis of a three-factor model proposed by the Danish Society of Actuaries for forecasting and risk analysis
- Explicit solution simulation method for the 3/2 model
- Consistent modelling of VIX and equity derivatives using a \(3/2\) plus jumps model
This page was built for publication: Exact simulation of the 3/2 model
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q3166709)
