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Option Price Decomposition in Spot-Dependent Volatility Models and Some Applications

Raúl Merino & Josep Vives

International Journal of Stochastic Analysis2017https://doi.org/10.1155/2017/8019498article
ABDC B
Weight
0.34

Abstract

We obtain a Hull and White type option price decomposition for a general local volatility model. We apply the obtained formula to CEV model. As an application we give an approximated closed formula for the call option price under a CEV model and an approximated short term implied volatility surface. These approximated formulas are used to estimate model parameters. Numerical comparison is performed for our new method with exact and approximated formulas existing in the literature.

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https://doi.org/https://doi.org/10.1155/2017/8019498

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@article{raúl2017,
  title        = {{Option Price Decomposition in Spot-Dependent Volatility Models and Some Applications}},
  author       = {Raúl Merino & Josep Vives},
  journal      = {International Journal of Stochastic Analysis},
  year         = {2017},
  doi          = {https://doi.org/https://doi.org/10.1155/2017/8019498},
}

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Option Price Decomposition in Spot-Dependent Volatility Models and Some Applications

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0.34

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.00 × 0.4 = 0.00
M · momentum0.80 × 0.15 = 0.12
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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