On contingent-claim valuation in continuous-time for volatility models of Ornstein-Uhlenbeck type

• Autores: Michael Schröder
• Localización: Journal of computational and applied mathematics, ISSN 0377-0427, Vol. 260, Nº 1, 2014, págs. 36-53
• Idioma: inglés
• DOI: 10.1016/j.cam.2013.09.038
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• Resumen

  • The paper addresses the valuation of contingent claims in stochastic volatility models of Ornstein�Uhlenbeck type, stressing the situation when volatility is driven by purelydiscontinuous Lévy processes. A reduction series methodology is developed for this purpose which also provides a way for the numerical study of the value-functionals.

    The methodology is illustrated in the options case and in models based on GIGdistributions;

    numerical examples are provided. These examples show how the series enable computation accuracies of some three decimal places with just a single digit number of terms.