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A decomposition formula for option prices in the Heston model and applications to option pricing approximation

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  • Elisa Alòs

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Abstract

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Suggested Citation

  • Elisa Alòs, 2012. "A decomposition formula for option prices in the Heston model and applications to option pricing approximation," Finance and Stochastics, Springer, vol. 16(3), pages 403-422, July.
  • Handle: RePEc:spr:finsto:v:16:y:2012:i:3:p:403-422
    DOI: 10.1007/s00780-012-0177-0
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    References listed on IDEAS

    as
    1. Eric Benhamou & Emmanuel Gobet & Mohammed Miri, 2010. "Expansion formulas for European options in a local volatility model," Post-Print hal-00325939, HAL.
    2. Stein, Elias M & Stein, Jeremy C, 1991. "Stock Price Distributions with Stochastic Volatility: An Analytic Approach," Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 727-752.
    3. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    4. Fabio Antonelli & Sergio Scarlatti, 2009. "Pricing options under stochastic volatility: a power series approach," Finance and Stochastics, Springer, vol. 13(2), pages 269-303, April.
    5. Alos, Elisa & Ewald, Christian-Oliver, 2007. "Malliavin differentiability of the Heston volatility and applications to option pricing," MPRA Paper 3237, University Library of Munich, Germany.
    6. Ball, Clifford A. & Roma, Antonio, 1994. "Stochastic Volatility Option Pricing," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(04), pages 589-607, December.
    7. E. Benhamou & E. Gobet & M. Miri, 2009. "Smart expansion and fast calibration for jump diffusions," Finance and Stochastics, Springer, vol. 13(4), pages 563-589, September.
    8. Hull, John C & White, Alan D, 1987. " The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
    9. Eric Benhamou & Emmanuel Gobet & Mohammed Miri, 2009. "Smart expansion and fast calibration for jump diffusion," Post-Print hal-00200395, HAL.
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    Cited by:

    1. Akihiko Takahashi & Toshihiro Yamada, 2014. "This paper proposes a unified method for precise estimates of the error bounds in asymptotic expansions of an option price and its Greeks (sensitivities) under a stochastic volatility model. More gene," CARF F-Series CARF-F-347, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Sep 2014.

    More about this item

    Keywords

    Stochastic volatility; Heston model; Itô calculus; 91B28; 91B70; G13;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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