Closed-Form Approximation of Timer Option Prices under General Stochastic Volatility Models
We develop an asymptotic expansion technique for pricing timer options under general stochastic volatility models around small volatility of variance. Closed-form approximation formulas have been obtained for the Heston model and the 3/2-model. The approximation has an easy-to-understand Black-Scholes-like form and many other attractive properties. Numerical analysis shows that the approximation formulas are very fast and accurate.
|Date of creation:||2013|
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- Li, Minqiang, 2008. "Closed-Form Approximations for Spread Option Prices and Greeks," MPRA Paper 6994, University Library of Munich, Germany.
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- Li, Minqiang & Deng, Shijie & Zhou, Jieyun, 2008. "Multi-asset Spread Option Pricing and Hedging," MPRA Paper 8259, University Library of Munich, Germany.
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