Probability Distribution and Option Pricing for Drawdown in a Stochastic Volatility Environment
This paper studies the probability distribution and option pricing for drawdown in a stochastic volatility environment. Their analytical approximation formulas are derived by the application of a singular perturbation method (Fouque et al. ). The mathematical validity of the approximation is also proven. Then, numerical examples show that the instantaneous correlation between the asset value and the volatility state crucially affects the probability distribution and option prices for drawdown.
|Date of creation:||Jun 2009|
|Contact details of provider:|| Postal: Hongo 7-3-1, Bunkyo-ku, Tokyo 113-0033|
Web page: http://www.cirje.e.u-tokyo.ac.jp/index.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sanford J. Grossman & Zhongquan Zhou, 1993. "Optimal Investment Strategies For Controlling Drawdowns," Mathematical Finance, Wiley Blackwell, vol. 3(3), pages 241-276.
When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2009cf625. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CIRJE administrative office)
If references are entirely missing, you can add them using this form.