American option valuation in a stochastic volatility model with transaction costs

DOI10.1080/17442508.2014.989525zbMATH Open1321.93065OpenAlexW2059340050MaRDI QIDQ5265796FDOQ5265796

Andrea Cosso, Carlo Sgarra, Daniele Marazzina

Publication date: 29 July 2015

Published in: Stochastics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1080/17442508.2014.989525

zbMATH Keywords

Hamilton-Jacobi-Bellman equationstochastic volatilitytransaction costsviscosity solutionsAmerican optionssingular stochastic optimal control problem

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Existence of optimal solutions to problems involving randomness (49J55) Viscosity solutions to Hamilton-Jacobi equations in optimal control and differential games (49L25) Applications of stochastic analysis (to PDEs, etc.) (60H30) Stochastic models in economics (91B70) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Cites Work

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• A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
• Continuous-time stochastic control and optimization with financial applications
• Stock Price Distributions with Stochastic Volatility: An Analytic Approach
• THE EVALUATION OF AMERICAN OPTION PRICES UNDER STOCHASTIC VOLATILITY AND JUMP-DIFFUSION DYNAMICS USING THE METHOD OF LINES
• An Asymptotic Analysis of an Optimal Hedging Model for Option Pricing with Transaction Costs
• European Option Pricing with Transaction Costs
• Multigrid for American option pricing with stochastic volatility
• A tree-based method to price American options in the Heston model
• Numerical solutions for option pricing models including transaction costs and stochastic volatility
• Utility based option pricing with proportional transaction costs and diversification problems: An interior-point optimization approach

Cited In (6)

• Optimal harvesting under marine reserves and uncertain environment
• American option pricing under two stochastic volatility processes
• Pricing European options with proportional transaction costs and stochastic volatility using a penalty approach and a finite volume scheme
• Valuation of American Call Option Considering Uncertain Volatility
• American option pricing under stochastic volatility: an empirical evaluation
• Hedging of American options under transaction costs

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