DAS, KAUSTAV
Closed-form approximations for option prices in stochastic volatility models via the mixing solution
We consider the classical European option pricing problem in a general stochastic volatility framework with time-dependent parameters. It is possible to express the price of a European option as the expectation of a functional of the integrated variance process. In particular, this functional itself is similar to that of a Black-Scholes formula, which possesses many well studied properties. From there, it is possible to utilise expansion techniques to approximate the option price in a closed-form manner. We achieve this using two different types of approaches, one contingent on change of measure techniques, the other on Malliavin calculus machinery.
Closed-form approximation;Closed-form expansion;Stochastic Volatility
2019-12-03
https://bridges.monash.edu/articles/thesis/Closed-form_approximations_for_option_prices_in_stochastic_volatility_models_via_the_mixing_solution/11309306

10.26180/5de607587f997