Closed-Form Approximation of Timer Option Prices under General Stochastic Volatility Models

We develop an asymptotic expansion technique for pricing timer options under general stochastic volatility models around small volatility of variance. Closed-form approximation formulas have been obtained for the Heston model and the 3/2-model. The approximation has an easy-to-understand Black-Scholes-like form and many other attractive properties. Numerical analysis shows that the approximation formulas are very fast and accurate.

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Year of publication:	2013
Authors:	Li, Minqiang ; Mercurio, Fabio

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Type of publication:	Book / Working Paper
Language:	English
Notes:	Li, Minqiang and Mercurio, Fabio (2013): Closed-Form Approximation of Timer Option Prices under General Stochastic Volatility Models.
Classification:	C02 - Mathematical Methods ; G12 - Asset Pricing
Source:	BASE

Persistent link: https://ebvufind01.dmz1.zbw.eu/10015237354