Pricing Path-dependent Options under Stochastic Volatility via Mellin Transform
Pricing of Securities
2022-05-03 v1
Abstract
In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit closed-form formulas for the zero-order term and the first-order correction term, we use Mellin transform. We also conduct a sensitivity analysis on these formulas, and compare the option prices calculated by them with those generated by Monte-Carlo simulation.
Cite
@article{arxiv.2205.00573,
title = {Pricing Path-dependent Options under Stochastic Volatility via Mellin Transform},
author = {Jiling Cao and Jeong-Hoon Kim and Xi Li and Wenjun Zhang},
journal= {arXiv preprint arXiv:2205.00573},
year = {2022}
}
Comments
19 pages with 4 figures