An Approximated European Option Price under Stochastic Elasticity of Variance using Mellin Transforms
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In this paper, we derive a closed-form formula of a second- order approximation for a European corrected option price under stochas- tic elasticity of variance model mentioned in Kim et al. (2014) [1] [J.-H. Kim, J Lee, S.-P. Zhu, S.-H. Yu, A multiscale correction to the Black- Scholes formula, Appl. Stoch. Model. Bus. 30 (2014)]. To find the explicit-form correction to the option price, we use Mellin transform ap- proaches.
Abstract
In this paper, we derive a closed-form formula of a second- order approximation for a European corrected option price under stochas- tic elasticity of variance model mentioned in Kim et al. (2014) [1] [J.-H. Kim, J Lee, S.-P. Zhu, S.-H. Yu, A multiscale correction to the Black- Scholes formula, Appl. Stoch. Model. Bus. 30 (2014)]. To find the explicit-form correction to the option price, we use Mellin transform ap- proaches.
참고문헌 (5)
- J.H. Kim, "A multiscale correction to the Black-Scholes formula", Appl Stoch Model Bus, 30, pp.753~765 (2014)[DOI]
- B. Oksendal, "Stochastic Differential Equations" (2003), Springer
- E. Hassan, "A note on Mellin transform and partial differential equations", International Journal of Pure and Applied Mathematics, 34(4), pp.457~467 (2007)
- R. Panini, "Option pricing with Mellin transforms", Mathematical and Computer Modelling, 40, pp.43~56 (2004)[DOI]
- J.H. Yoon, "Mellin transform method for European option pricing with Hull-White stochastic interest rate", Journal of Applied Mathematics, 2014, pp.7~ (2014)