Title: Option pricing for a lognormal stochastic volatility model
Abstract: In this article, we propose an analytical approximation for the pricing of European options for a lognormal stochastic model. This approximation appears to be a second-order Taylor series expansion of the Fourier transform with respect to the volatility of volatility. We give, using these formulas, a new method of variance reduction for the Monte-Carlo simulation of the trajectories of the underlying.
Publication Year: 2011
Publication Date: 2011-09-15
Language: en
Type: article
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Cited By Count: 1
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