NEARLY EXACT OPTION PRICE SIMULATION USING CHARACTERISTIC FUNCTIONS-Reference-Cited by-同舟云学术

NEARLY EXACT OPTION PRICE SIMULATION USING CHARACTERISTIC FUNCTIONS

Published:2012-11 Issue:07 Volume:15 Page:1250047
ISSN:0219-0249
Container-title:International Journal of Theoretical and Applied Finance
language:en
Short-container-title:Int. J. Theor. Appl. Finan.

Author:

BERNARD CAROLE¹,CUI ZHENYU¹,MCLEISH DON¹

Affiliation:

1. Department of Statistics and Actuarial Science, University of Waterloo, 200 University Av., W. Waterloo, Ontario, N2L 3G1, Canada

Abstract

This paper presents a new approach to perform a nearly unbiased simulation using inversion of the characteristic function. As an application we are able to give unbiased estimates of the price of forward starting options in the Heston model and of continuously monitored Parisian options in the Black-Scholes framework. This method of simulation can be applied to problems for which the characteristic functions are easily evaluated but the corresponding probability density functions are complicated.

Publisher

World Scientific Pub Co Pte Lt

Subject

General Economics, Econometrics and Finance,Finance

Link

https://www.worldscientific.com/doi/pdf/10.1142/S0219024912500471

Reference32 articles.

1. Numerical Inversion of Laplace Transforms of Probability Distributions

2. FORWARD START OPTIONS UNDER STOCHASTIC VOLATILITY AND STOCHASTIC INTEREST RATES

3. Pricing of Parisian Options for a Jump-Diffusion Model with Two-Sided Jumps

4. Representations of the First Hitting Time Density of an Ornstein-Uhlenbeck Process1

5. Monte Carlo methods for pricing discrete Parisian options

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