Computation of option greeks under hybrid stochastic volatility models via Malliavin calculus

Bilgi Yilmaz

Papers from arXiv.org

Abstract: This study introduces computation of option sensitivities (Greeks) using the Malliavin calculus under the assumption that the underlying asset and interest rate both evolve from a stochastic volatility model and a stochastic interest rate model, respectively. Therefore, it integrates the recent developments in the Malliavin calculus for the computation of Greeks: Delta, Vega, and Rho and it extends the method slightly. The main results show that Malliavin calculus allows a running Monte Carlo (MC) algorithm to present numerical implementations and to illustrate its effectiveness. The main advantage of this method is that once the algorithms are constructed, they can be used for numerous types of option, even if their payoff functions are not differentiable.

Date: 2018-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Modern Stochastics: Theory and Applications 2018, Vol. 5, No. 2, 145-165

Downloads: (external link)
http://arxiv.org/pdf/1806.06061 Latest version (application/pdf)

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:arx:papers:1806.06061

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().