𝔖 Bobbio Scriptorium
✦   LIBER   ✦

Stochastic volatility and the mean reverting process

✍ Scribed by Sotirios Sabanis

Book ID
102217873
Publisher
John Wiley and Sons
Year
2002
Tongue
English
Weight
130 KB
Volume
23
Category
Article
ISSN
0270-7314

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

This article employs an approach that is an extension of the Hull and White (1987) model, for pricing European options under the assumption of a mean reverting
volatility for the underlying asset. The approach uses a Taylor series expansion method to approximate the price
of a European call option in a market with no arbitrage opportunities. The transition to a riskneutral economy is
accomplished by introducing an equivalent martingale measure based on the findings of Romano and Touzi
(1997). Numerical results are obtained and compared with similar studies
(Lewis, 2000). Β© 2003 Wiley Periodicals, Inc. Jrl Fut Mark
23:33–47, 2003

πŸ“œ SIMILAR VOLUMES

FFT based option pricing under a mean re
FFT based option pricing under a mean reverting process with stochastic volatility and jumps
✍ E. Pillay; J.G. O’Hara πŸ“‚ Article πŸ“… 2011 πŸ› Elsevier Science 🌐 English βš– 228 KB

Numerous studies present strong empirical evidence that certain financial assets may exhibit mean reversion, stochastic volatility or jumps. This paper explores the valuation of European options when the underlying asset follows a mean reverting log-normal process with stochastic volatility and jump