We deal with the problem of pricing barrier options on an underlying described by the mixed fractional Brownian model. To this aim, we consider the initial-boundary value partial differential problem that yields the option price and we derive an integral representation of it in which the integrand functions must be obtained solving Volterra equations of the first kind. In addition, we develop an ad-hoc numerical procedure to solve the integral equations obtained. Numerical simulations reveal that the proposed method is extremely accurate and fast, and performs significantly better than the finite difference method. (C) 2016 Elsevier Ltd. All rights reserved.

Ballestra, L., Pacelli, G., Radi, D., A very efficient approach for pricing barrier options on an underlying described by the mixed fractional Brownian motion, <<CHAOS, SOLITONS AND FRACTALS>>, 2016; 87 (N/A): 240-248. [doi:10.1016/j.chaos.2016.04.008] [https://hdl.handle.net/10807/231502]

A very efficient approach for pricing barrier options on an underlying described by the mixed fractional Brownian motion

Radi, Davide
Ultimo
Methodology
2016

Abstract

We deal with the problem of pricing barrier options on an underlying described by the mixed fractional Brownian model. To this aim, we consider the initial-boundary value partial differential problem that yields the option price and we derive an integral representation of it in which the integrand functions must be obtained solving Volterra equations of the first kind. In addition, we develop an ad-hoc numerical procedure to solve the integral equations obtained. Numerical simulations reveal that the proposed method is extremely accurate and fast, and performs significantly better than the finite difference method. (C) 2016 Elsevier Ltd. All rights reserved.
2016
Inglese
Ballestra, L., Pacelli, G., Radi, D., A very efficient approach for pricing barrier options on an underlying described by the mixed fractional Brownian motion, <<CHAOS, SOLITONS AND FRACTALS>>, 2016; 87 (N/A): 240-248. [doi:10.1016/j.chaos.2016.04.008] [https://hdl.handle.net/10807/231502]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/231502
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