Valuing options in Heston's stochastic volatility model: another analytical approach
type: Item
instance of: scholarly article
title: Valuing options in Heston's stochastic volatility model: another analytical approach
zbMATH Open document ID: 1223.91038
DOI: 10.1155/2011/198469
author: Robert Frontczak
published in: Journal of Applied Mathematics
publication date: 2011-10-27T00:00:00Z
review text: Summary: We are concerned with the valuation of European options in the Heston stochastic volatility model with correlation. Based on Mellin transforms, we present new solutions for the price of European options and hedging parameters. In contrast to Fourier-based approaches, where the transformation variable is usually the log-stock price at maturity, our framework focuses on directly transforming the current stock price. Our solution has the nice feature that it requires only a single integration. We make numerical tests to compare our results with Heston's solution based on Fourier inversion and investigate the accuracy of the derived pricing formulae.
Mathematics Subject Classification ID: 91G20
zbMATH DE Number: 5964433
Wikidata QID: Q58690285
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2011/198469
OpenAlex ID: W2141926061
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description: scientific article; zbMATH DE number 5964433