EconPapers    
Economics at your fingertips  
 

A Generic Decomposition Formula for Pricing Vanilla Options under Stochastic Volatility Models

Raúl Merino and Josep Vives

International Journal of Stochastic Analysis, 2015, vol. 2015, 1-11

Abstract:

We obtain a decomposition of the call option price for a very general stochastic volatility diffusion model, extending a previous decomposition formula for the Heston model. We realize that a new term arises when the stock price does not follow an exponential model. The techniques used for this purpose are nonanticipative. In particular, we also see that equivalent results can be obtained by using Functional Itô Calculus. Using the same generalizing ideas, we also extend to nonexponential models the alternative call option price decomposition formula written in terms of the Malliavin derivative of the volatility process. Finally, we give a general expression for the derivative of the implied volatility under both the anticipative and the nonanticipative cases.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://downloads.hindawi.com/journals/IJSA/2015/103647.pdf (application/pdf)
http://downloads.hindawi.com/journals/IJSA/2015/103647.xml (text/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hin:jnijsa:103647

DOI: 10.1155/2015/103647

Access Statistics for this article

More articles in International Journal of Stochastic Analysis from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().

 
Page updated 2021-01-22
Handle: RePEc:hin:jnijsa:103647