Homotopy analysis method for option pricing under stochastic volatility

Sang Hyeon Park; Jeong Hoon Kim

doi:10.1016/j.aml.2011.04.034

Homotopy analysis method for option pricing under stochastic volatility

Sang Hyeon Park, Jeong Hoon Kim

Department of Mathematics

Research output: Contribution to journal › Article › peer-review

26 Citations (Scopus)

Abstract

In this paper, the homotopy analysis method, whose original concept comes from algebraic topology, is applied to connect the Black-Scholes option price (the good initial guess) to the option price under general stochastic volatility environment in a recursive manner. We obtain the homotopy solutions for the European vanilla and barrier options as well as the relevant convergence conditions.

Original language	English
Pages (from-to)	1740-1744
Number of pages	5
Journal	Applied Mathematics Letters
Volume	24
Issue number	10
DOIs	https://doi.org/10.1016/j.aml.2011.04.034
Publication status	Published - 2011 Oct

Bibliographical note

Funding Information:
This work was supported by the Ministry of Knowledge Economy and Korea Institute for Advancement in Technology through the Workforce Development Program in Strategic Technology.

All Science Journal Classification (ASJC) codes

Applied Mathematics

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10.1016/j.aml.2011.04.034

Cite this

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AB - In this paper, the homotopy analysis method, whose original concept comes from algebraic topology, is applied to connect the Black-Scholes option price (the good initial guess) to the option price under general stochastic volatility environment in a recursive manner. We obtain the homotopy solutions for the European vanilla and barrier options as well as the relevant convergence conditions.

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Homotopy analysis method for option pricing under stochastic volatility

Abstract

Bibliographical note

All Science Journal Classification (ASJC) codes

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