Pricing vulnerable options under a stochastic volatility model

Sung Jin Yang; Min Ku Lee; Jeong Hoon Kim

doi:10.1016/j.aml.2014.03.007

Pricing vulnerable options under a stochastic volatility model

Sung Jin Yang, Min Ku Lee, Jeong Hoon Kim

Department of Mathematics

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

53 Citations (Scopus)

Abstract

In this paper, we consider the pricing of vulnerable options when the underlying asset follows a stochastic volatility model. We use multiscale asymptotic analysis to derive an analytic approximation formula for the price of the vulnerable options and study the stochastic volatility effect on the option price. A numerical experiment result is presented to demonstrate our findings graphically.

Original language	English
Pages (from-to)	7-12
Number of pages	6
Journal	Applied Mathematics Letters
Volume	34
Issue number	1
DOIs	https://doi.org/10.1016/j.aml.2014.03.007
Publication status	Published - 2014 Aug

Bibliographical note

Funding Information:
We thank an anonymous referee for valuable comments and suggestions provided on this paper. The research of J.-H. Kim was supported by the National Research Foundation of Korea NRF-2013R1A1A2A10006693 .

All Science Journal Classification (ASJC) codes

Applied Mathematics

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10.1016/j.aml.2014.03.007

Cite this

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Pricing vulnerable options under a stochastic volatility model

Abstract

Bibliographical note

All Science Journal Classification (ASJC) codes

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