Open AccessPRICING EUROPEAN OPTIONS IN SELECTED STOCHASTIC VOLATILITY MODELS
Author(s) -
Arkadiusz Orzechowski
Publication year - 2020
Publication title -
metody ilościowe w badaniach ekonomicznych/quantitative methods in economics
Language(s) - English
Resource type - Journals
eISSN - 2543-8565
pISSN - 2082-792X
DOI - 10.22630/mibe.2020.21.3.14
Subject(s) - stochastic volatility , volatility (finance) , econometrics , valuation of options , economics , gauss , sabr volatility model , financial economics , computer science , mathematics , mathematical optimization , mathematical economics , physics , quantum mechanics
In this paper four methods of calculating characteristic functions and their application to selected stochastic volatility models are considered. The methods applied are based on the assumption that the prices of European calls are evaluated numerically by means of the Gauss-Kronrod quadrature. Such approach is used to investigate computational efficiency of pricing European calls. Particular attention in this matter is paid to the speed of generating theoretical prices of the analyzed contracts.