East Asian mathematical journal

  • 제34권3호
  • /
  • Pages.239-248
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  • 2018
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  • 1226-6973(pISSN)
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  • 2287-2833(eISSN)
영남수학회 (The Youngnam Mathematical Society)
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AN APPROXIMATED EUROPEAN OPTION PRICE UNDER STOCHASTIC ELASTICITY OF VARIANCE USING MELLIN TRANSFORMS

  • Kim, So-Yeun (Department of Finance and Insurance, Hongik University) ;
  • Yoon, Ji-Hun (Department of Mathematics, Pusan National University)
  • 투고 : 2018.04.27
  • 심사 : 2018.05.12
  • 발행 : 2018.05.31
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초록

In this paper, we derive a closed-form formula of a second-order approximation for a European corrected option price under stochastic elasticity of variance model mentioned in Kim et al. (2014) [1] [J.-H. Kim, J Lee, S.-P. Zhu, S.-H. Yu, A multiscale correction to the Black-Scholes formula, Appl. Stoch. Model. Bus. 30 (2014)]. To find the explicit-form correction to the option price, we use Mellin transform approaches.

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참고문헌

  1. J.H. Kim, J. Lee, S.P. Zhu, S.H. Yu, A multiscale correction to the Black-Scholes formula. Appl Stoch Model Bus 2014, 30, 753-765. https://doi.org/10.1002/asmb.2006
  2. B. Oksendal, Stochastic Differential Equations, Springer, New York, 2003.
  3. E. Hassan, K. Adem, A note on Mellin transform and partial differential equations, International Journal of Pure and Applied Mathematics 2007, 34(4), 457-467.
  4. R. Panini, R.-P. Srivastav, Option pricing with Mellin transforms, Mathematical and Computer Modelling 2004, 40, 43-56. https://doi.org/10.1016/j.mcm.2004.07.008
  5. J.H. Yoon, Mellin transform method for European option pricing with Hull-White stochastic interest rate, Journal of Applied Mathematics (2014) Volume 2014, Article ID 759562, 7 page.