Further analysis on volatility function selection for simulating European option prices under Ornstein-Uhlenbeck stochastic volatility assumption

B. P.N. Simanjuntak, B. D. Handari, G. F. Hartono

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

These days, option pricing is crucial in trading to make a decision that would lead to the best benefits. There are some conditions that must be considered in choosing volatility functions in simulating European option price model under the Ornstein-Uhlenbeck stochastic volatility assumption. To approximate the option price based on that assumption, we use the Euler-Maruyama scheme to approximate a call option prices based on the European option model. The volatility functions for the model must meet a Holder condition requirement to achieve error convergence when the option price is approximated. Regarding that purpose, we consider some volatility functions and investigate how the chosen functions affect the performance of the model.

Original languageEnglish
Title of host publicationProceedings of the 4th International Symposium on Current Progress in Mathematics and Sciences, ISCPMS 2018
EditorsTerry Mart, Djoko Triyono, Ivandini T. Anggraningrum
PublisherAmerican Institute of Physics Inc.
ISBN (Electronic)9780735419155
DOIs
Publication statusPublished - 4 Nov 2019
Event4th International Symposium on Current Progress in Mathematics and Sciences 2018, ISCPMS 2018 - Depok, Indonesia
Duration: 30 Oct 201831 Oct 2018

Publication series

NameAIP Conference Proceedings
Volume2168
ISSN (Print)0094-243X
ISSN (Electronic)1551-7616

Conference

Conference4th International Symposium on Current Progress in Mathematics and Sciences 2018, ISCPMS 2018
Country/TerritoryIndonesia
CityDepok
Period30/10/1831/10/18

Keywords

  • Euler-Maruyama
  • option pricing
  • volatility function

Fingerprint

Dive into the research topics of 'Further analysis on volatility function selection for simulating European option prices under Ornstein-Uhlenbeck stochastic volatility assumption'. Together they form a unique fingerprint.

Cite this