Approximate option pricing formula for Barndorff-Nielsen and Shephard model

DOI10.1142/S021902492250008XMaRDI QIDQ5066302zbMATH OpenOpenAlexWikidataFDO

Authors Takuji Arai

Publication date 29 March 2022

Published in International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2104.10877

zbMATH Keywords

approximate option pricingBarndorff-Nielsen and Shephard modelsBlack-Scholes formulastochastic volatility models

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20)

Abstract: For the Barndorff-Nielsen and Shephard model, we present approximate expressions of call option prices based on the decomposition formula developed by Arai (2021). Besides, some numerical experiments are also implemented to make sure how effective our approximations are.

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Cites work

• A decomposition formula for option prices in the Heston model and applications to option pricing approximation
• Calibration of stochastic volatility models via second-order approximation: the Heston case
• Decomposition formula for jump diffusion models
• Financial Modelling with Jump Processes
• scientific article; zbMATH DE number 1639858 (Why is no real title available?)
• Local risk-minimization for Barndorff-Nielsen and Shephard models
• Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics. (With discussion)
• Option price decomposition in spot-dependent volatility models and some applications
• Option Pricing in Stochastic Volatility Models of the Ornstein‐Uhlenbeck type

Cited in

(5)

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• Generalized Barndorff-Nielsen and Shephard model and discretely monitored option pricing
• Pricing and hedging of VIX options for Barndorff-Nielsen and Shephard models
• Higher order approximation of option prices in Barndorff-Nielsen and Shephard models
• Decomposition of the option pricing formula for infinite activity jump-diffusion stochastic volatility models

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