A General Valuation Framework for SABR and Stochastic Local Volatility Models

DOI10.1137/16M1106572zbMATH Open1410.91441OpenAlexW2805086499WikidataQ129910723 ScholiaQ129910723MaRDI QIDQ4579833FDOQ4579833

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Publication date: 10 August 2018

Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1137/16m1106572

zbMATH Keywords

option pricingAmerican optionscontinuous-time Markov chainsAsian optionsbarrier optionsoccupation time derivativesexotic optionsCTMCSABRstochastic local volatilityquadratic local volatility

Mathematics Subject Classification ID

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

Cites Work

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• The Fourier-series method for inverting transforms of probability distributions
• Mimicking the one-dimensional marginal distributions of processes having an Ito differential
• Asymptotic Implied Volatility at the Second Order with Application to the SABR Model
• Option pricing with quadratic volatility: a revisit
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• Approximations for functionals and optimal control problems on jump diffusion processes
• REGULAR VARIATION AND SMILE ASYMPTOTICS
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• Small-Time Asymptotics under Local-Stochastic Volatility with a Jump-to-Default: Curvature and the Heat Kernel Expansion
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• A unified approach to Bermudan and barrier options under stochastic volatility models with jumps
• Weak convergence methods for approximation of the evaluation of path-dependent functionals
• AN IMPROVED MARKOV CHAIN APPROXIMATION METHODOLOGY: DERIVATIVES PRICING AND MODEL CALIBRATION
• Exact Simulation of the SABR Model
• THE 4/2 STOCHASTIC VOLATILITY MODEL: A UNIFIED APPROACH FOR THE HESTON AND THE 3/2 MODEL
• Option Pricing in Some Non-Lévy Jump Models
• Portfolio Optimization under Local-Stochastic Volatility: Coefficient Taylor Series Approximations and Implied Sharpe Ratio
• On a one time-step Monte Carlo simulation approach of the SABR model: application to European options
• A low-bias simulation scheme for the SABR stochastic volatility model
• SERIES EXPANSION OF THE SABR JOINT DENSITY
• Pricing of vanilla and first-generation exotic options in the local stochastic volatility framework: survey and new results
• On the Approximation of the SABR Model: A Probabilistic Approach
• Pricing of Parisian Options for a Jump-Diffusion Model with Two-Sided Jumps
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Cited In (41)

• Efficient recursion-quadrature algorithms for pricing Asian options and variance derivatives under stochastic volatility and Lévy jumps
• Hybrid equity swap, cap, and floor pricing under stochastic interest by Markov chain approximation
• Simulation of multidimensional diffusions with sticky boundaries via Markov chain approximation
• Efficient valuation of guaranteed minimum maturity benefits in regime switching jump diffusion models with surrender risk
• Valuation of variable annuities under stochastic volatility and stochastic jump intensity
• A transform-based method for pricing Asian options under general two-dimensional models
• A general method for analysis and valuation of drawdown risk
• Speed and duration of drawdown under general Markov models
• Markov chain approximation and measure change for time-inhomogeneous stochastic processes
• Efficient Asian option pricing under regime switching jump diffusions and stochastic volatility models
• Analysis of Markov Chain Approximation for Diffusion Models with Nonsmooth Coefficients
• LOCALIZED RADIAL BASIS FUNCTIONS FOR NO-ARBITRAGE PRICING OF OPTIONS UNDER STOCHASTIC ALPHA–BETA–RHO DYNAMICS
• Efficient simulation of generalized SABR and stochastic local volatility models based on Markov chain approximations
• CTMC integral equation method for American options under stochastic local volatility models
• The equivalent constant-elasticity-of-variance (CEV) volatility of the stochastic-alpha-beta-rho (SABR) model
• Analysis of VIX-linked fee incentives in variable annuities via continuous-time Markov chain approximation
• A general approach for Parisian stopping times under Markov processes
• Estimation of local volatilities in a generalized Black-Scholes model
• Pricing American drawdown options under Markov models
• A general approximation method for optimal stopping and random delay
• A new class of multidimensional Wishart-based hybrid models
• A Markov chain approximation scheme for option pricing under skew diffusions
• Analysis of Markov chain approximation for Asian options and occupation-time derivatives: Greeks and convergence rates
• A general continuous time Markov chain approximation for multi-asset option pricing with systems of correlated diffusions
• Markov chain approximation of one-dimensional sticky diffusions
• Quantization goes polynomial
• A general framework to simulate diffusions with discontinuous coefficients and local times
• The bilateral Gamma motion: calibration and option pricing
• Pricing some life-contingent lookback options under regime-switching Lévy models
• Convergence analysis for continuous-time Markov chain approximation of stochastic local volatility models: option pricing and greeks
• Analysis of Markov Chain Approximation for Option Pricing and Hedging: Grid Design and Convergence Behavior
• Robust willow tree method under Lévy processes
• Valuation of a DB underpin hybrid pension under a regime-switching Lévy model
• Stochastic local volatility models and the Wei-Norman factorization method
• Finite-time expected present value of operating costs until ruin in a Cox risk model with periodic observation
• A general approach for lookback option pricing under Markov models
• Mean-variance asset-liability management under CIR interest rate and the family of 4/2 stochastic volatility models with derivative trading
• A general framework for time-changed Markov processes and applications
• Valuation of European crude oil options with co-jump diffusions and stochastic interest rate
• Pricing of spread and exchange options in a rough jump-diffusion market
• Maximum likelihood estimation of diffusions by continuous time Markov chain

Uses Software

• PROJ_Option_Pricing_Matlab

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