Sample Path Generation of the Stochastic Volatility CGMY Process and Its Application to Path-Dependent Option Pricing

Young Shin Kim
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Young Shin Kim: College of Business, Stony Brook University, Stony Brook, NY 11794, USA

JRFM, 2021, vol. 14, issue 2, 1-18

Abstract: This paper proposes the sample path generation method for the stochastic volatility version of the CGMY process. We present the Monte-Carlo method for European and American option pricing with the sample path generation and calibrate model parameters to the American style S&P 100 index options market, using the least square regression method. Moreover, we discuss path-dependent options, such as Asian and Barrier options.

Keywords: stochastic volatility; Lévy process; American option; barrier option; Monte-Carlo simulation (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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