Pricing the European call option in the model with stochastic volatility driven by Ornstein-Uhlenbeck process. Exact formulas
From MaRDI portal
(Redirected from Publication:340779)
Abstract: We consider the Black--Scholes model of financial market modified to capture the stochastic nature of volatility observed at real financial markets. For volatility driven by the Ornstein--Uhlenbeck process, we establish the existence of equivalent martingale measure in the market model. The option is priced with respect to the minimal martingale measure for the case of uncorrelated processes of volatility and asset price, and an analytic expression for the price of European call option is derived. We use the inverse Fourier transform of a characteristic function and the Gaussian property of the Ornstein--Uhlenbeck process.
Recommendations
- Option pricing in the model with stochastic volatility driven by Ornstein-Uhlenbeck process. Simulation
- Option pricing under stochastic volatility: the exponential Ornstein-Uhlenbeck model
- Pricing lookback options on the stocks driven by exponential Ornstein-Uhlenbeck process
- Option Pricing in Stochastic Volatility Models of the Ornstein‐Uhlenbeck type
- Stochastic Volatility With an Ornstein–Uhlenbeck Process: An Extension
Cites work
- scientific article; zbMATH DE number 17495 (Why is no real title available?)
- scientific article; zbMATH DE number 1227086 (Why is no real title available?)
- scientific article; zbMATH DE number 1517499 (Why is no real title available?)
- scientific article; zbMATH DE number 1393004 (Why is no real title available?)
- European call option issued on a bond governed by a geometric or a fractional geometric Ornstein-Uhlenbeck process
- MEAN-REVERTING STOCHASTIC VOLATILITY
- On changes of measure in stochastic volatility models
- Option pricing under stochastic volatility: the exponential Ornstein-Uhlenbeck model
- Stochastic Volatility: Origins and Overview
- Stock price distributions with stochastic volatility: an analytic approach
- The mathematics of arbitrage
Cited in
(18)- Stochastic differential equations with generalized stochastic volatility and statistical estimators
- Option pricing in the model with stochastic volatility driven by Ornstein-Uhlenbeck process. Simulation
- Stochastic Volatility With an Ornstein–Uhlenbeck Process: An Extension
- European option pricing model with generalized Ornstein-Uhlenbeck process under stochastic earning yield and stochastic dividend yield
- European call option issued on a bond governed by a geometric or a fractional geometric Ornstein-Uhlenbeck process
- A dual martingale method for the option pricing of the stock prices following the O-U process
- scientific article; zbMATH DE number 2169711 (Why is no real title available?)
- Option Pricing in Stochastic Volatility Models of the Ornstein‐Uhlenbeck type
- Symmetry and Bates' rule in Ornstein-Uhlenbeck stochastic volatility models
- Fractional Cox-Ingersoll-Ross process with small Hurst indices
- European call option pricing under reflected Vasicek-Ornstein-Uhlenbeck model
- Pricing lookback options on the stocks driven by exponential Ornstein-Uhlenbeck process
- Option pricing with fractional stochastic volatility and discontinuous payoff function of polynomial growth
- Option pricing under Ornstein-Uhlenbeck stochastic volatility: a linear model
- Drift parameter estimation in stochastic differential equation with multiplicative stochastic volatility
- Stochastic representation and path properties of a fractional Cox-Ingersoll-Ross process
- Option pricing under stochastic volatility: the exponential Ornstein-Uhlenbeck model
- An application of the Malliavin calculus for calculating the precise and approximate prices of options with stochastic volatility
This page was built for publication: Pricing the European call option in the model with stochastic volatility driven by Ornstein-Uhlenbeck process. Exact formulas
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q340779)
