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2009•RePEc: Research Papers in EconomicsRequires access

"Pricing Average Options under Stochastic Volatility Models" (in Japanese)

Kenichiro Shiraya, Akihiko Takahashi, Masashi Toda

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Abstract

This paper derives an approximation formula for average options under two stochastic volatility models such as Heston and ă(Lambda)-SABR models by using an asymptotic expansion method. Moreover, numerical examples with various parameters some of which are obtained by calibration to WTI futures options prices in NYMEX confirm the effectiveness of our formula.

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What this paper is about

This paper derives an approximation formula for average options under two stochastic volatility models such as Heston and ă(Lambda)-SABR models by using an asymptotic expansion method. Moreover, numerical examples with various parameters some of which are obtained by calibration to WTI futures options prices in NYMEX confirm the effectiveness of our formula.

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Available abstract

This paper derives an approximation formula for average options under two stochastic volatility models such as Heston and ă(Lambda)-SABR models by using an asymptotic expansion method. Moreover, numerical examples with various parameters some of which are obtained by calibration to WTI futures options prices in NYMEX confirm the effectiveness of our formula.

Key concepts: SABR volatility model, Stochastic volatility, Futures contract, Heston model, Volatility (finance), Econometrics, Economics, Implied volatility

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