Pricing options under the non-affine stochastic volatility models: An extension of the high-order compact numerical scheme

被引：3

作者：

Shi, Guangping ^{[1
]}

Liu, Xiaoxing ^{[1
]}

Tang, Pan ^{[1
]}

机构：

[1] Southeast Univ, Sch Econ & Management, Nanjing 211189, Jiangsu, Peoples R China

来源：

FINANCE RESEARCH LETTERS | 2016年 / 16卷

关键词：

Non-affine stochastic volatility; Option pricing; High-order compact finite difference method; Variable mixed derivatives; Nonlinear coefficients; AMERICAN OPTIONS; DYNAMICS;

D O I：

10.1016/j.frl.2015.12.004

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

We consider an improvement of a high-order compact finite difference scheme for option pricing in non-affine stochastic volatility models. Upon applying a proper transformation to equate the different coefficients of second-order non-cross derivatives, a high order compact finite difference scheme is developed to solve the partial differential equation with nonlinear coefficients that the option values satisfied. Based on the local von Neumann stability analysis, a theoretical stability result is obtained under certain restrictions. Numerical experiments are presented showing the convergence and validity of the expansion methods and the important effects of the non-affine coefficient and volatility of volatility on option values. (C) 2015 Elsevier Inc. All rights reserved.

引用

页码：220 / 229

页数：10

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