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