Pricing Barrier Options in the Heston Model Using the Heath-Platen Estimator

Pricing Barrier Options in the Heston Model Using the Heath-Platen Estimator
Author: Sema Coskun
Publisher:
Total Pages: 16
Release: 2018
Genre:
ISBN:

Both barrier options and the Heston stochastic volatility model are omnipresent in real-life applications of financial mathematics. Therefore, we apply the Heath-Platen (HP) estimator as first introduced by Heath and Platen to price barrier options in the Heston model setting as an alternative to conventional Monte Carlo methods and PDE based methods. We demonstrate the superior performance of the HP estimator via numerical examples and explain this performance by a detailed look at the underlying theoretical concept of the HP estimator.

Monte Carlo Methods and Models in Finance and Insurance

Monte Carlo Methods and Models in Finance and Insurance
Author: Ralf Korn
Publisher: CRC Press
Total Pages: 485
Release: 2010-02-26
Genre: Business & Economics
ISBN: 1420076191

Offering a unique balance between applications and calculations, Monte Carlo Methods and Models in Finance and Insurance incorporates the application background of finance and insurance with the theory and applications of Monte Carlo methods. It presents recent methods and algorithms, including the multilevel Monte Carlo method, the statistical Rom

Financial Engineering with Finite Elements

Financial Engineering with Finite Elements
Author: Juergen Topper
Publisher: John Wiley & Sons
Total Pages: 378
Release: 2005-06-24
Genre: Business & Economics
ISBN: 0470012919

The pricing of derivative instruments has always been a highly complex and time-consuming activity. Advances in technology, however, have enabled much quicker and more accurate pricing through mathematical rather than analytical models. In this book, the author bridges the divide between finance and mathematics by applying this proven mathematical technique to the financial markets. Utilising practical examples, the author systematically describes the processes involved in a manner accessible to those without a deep understanding of mathematics. * Explains little understood techniques that will assist in the accurate more speedy pricing of options * Centres on the practical application of these useful techniques * Offers a detailed and comprehensive account of the methods involved and is the first to explore the application of these particular techniques to the financial markets

Option Pricing and Estimation of Financial Models with R

Option Pricing and Estimation of Financial Models with R
Author: Stefano M. Iacus
Publisher: John Wiley & Sons
Total Pages: 402
Release: 2011-02-23
Genre: Business & Economics
ISBN: 1119990203

Presents inference and simulation of stochastic process in the field of model calibration for financial times series modelled by continuous time processes and numerical option pricing. Introduces the bases of probability theory and goes on to explain how to model financial times series with continuous models, how to calibrate them from discrete data and further covers option pricing with one or more underlying assets based on these models. Analysis and implementation of models goes beyond the standard Black and Scholes framework and includes Markov switching models, Lévy models and other models with jumps (e.g. the telegraph process); Topics other than option pricing include: volatility and covariation estimation, change point analysis, asymptotic expansion and classification of financial time series from a statistical viewpoint. The book features problems with solutions and examples. All the examples and R code are available as an additional R package, therefore all the examples can be reproduced.

The Heston Model and its Extensions in Matlab and C#

The Heston Model and its Extensions in Matlab and C#
Author: Fabrice D. Rouah
Publisher: John Wiley & Sons
Total Pages: 437
Release: 2013-08-01
Genre: Business & Economics
ISBN: 1118695178

Tap into the power of the most popular stochastic volatility model for pricing equity derivatives Since its introduction in 1993, the Heston model has become a popular model for pricing equity derivatives, and the most popular stochastic volatility model in financial engineering. This vital resource provides a thorough derivation of the original model, and includes the most important extensions and refinements that have allowed the model to produce option prices that are more accurate and volatility surfaces that better reflect market conditions. The book's material is drawn from research papers and many of the models covered and the computer codes are unavailable from other sources. The book is light on theory and instead highlights the implementation of the models. All of the models found here have been coded in Matlab and C#. This reliable resource offers an understanding of how the original model was derived from Ricatti equations, and shows how to implement implied and local volatility, Fourier methods applied to the model, numerical integration schemes, parameter estimation, simulation schemes, American options, the Heston model with time-dependent parameters, finite difference methods for the Heston PDE, the Greeks, and the double Heston model. A groundbreaking book dedicated to the exploration of the Heston model—a popular model for pricing equity derivatives Includes a companion website, which explores the Heston model and its extensions all coded in Matlab and C# Written by Fabrice Douglas Rouah a quantitative analyst who specializes in financial modeling for derivatives for pricing and risk management Engaging and informative, this is the first book to deal exclusively with the Heston Model and includes code in Matlab and C# for pricing under the model, as well as code for parameter estimation, simulation, finite difference methods, American options, and more.

Financial Engineering with Finite Elements

Financial Engineering with Finite Elements
Author: Jürgen Topper
Publisher: John Wiley & Sons
Total Pages: 398
Release: 2005-04
Genre: Business & Economics
ISBN:

The pricing of derivative instruments has always been a highly complex and time-consuming activity. Advances in technology, however, have enabled much quicker and more accurate pricing through mathematical rather than analytical models. In this book, the author bridges the divide between finance and mathematics by applying this proven mathematical technique to the financial markets. Utilising practical examples, the author systematically describes the processes involved in a manner accessible to those without a deep understanding of mathematics. * Explains little understood techniques that will assist in the accurate more speedy pricing of options * Centres on the practical application of these useful techniques * Offers a detailed and comprehensive account of the methods involved and is the first to explore the application of these particular techniques to the financial markets

Handbook of Financial Risk Management

Handbook of Financial Risk Management
Author: Ngai Hang Chan
Publisher: John Wiley & Sons
Total Pages: 391
Release: 2013-06-17
Genre: Business & Economics
ISBN: 1118573544

An authoritative handbook on risk management techniques and simulations as applied to financial engineering topics, theories, and statistical methodologies The Handbook of Financial Risk Management: Simulations and Case Studies illustrates the practical implementation of simulation techniques in the banking and financial industries through the use of real-world applications. Striking a balance between theory and practice, the Handbook of Financial Risk Management: Simulations and Case Studies demonstrates how simulation algorithms can be used to solve practical problems and showcases how accuracy and efficiency in implementing various simulation methods are indispensable tools in risk management. The book provides the reader with an intuitive understanding of financial risk management and deepens insight into those financial products that cannot be priced traditionally. The Handbook of Financial Risk Management also features: Examples in each chapter derived from consulting projects, current research, and course instruction Topics such as volatility, fixed-income derivatives, LIBOR Market Models, and risk measures Over twenty-four recognized simulation models Commentary, data sets, and computer subroutines available on a chapter-by-chapter basis As a complete reference for practitioners, the book is useful in the fields of finance, business, applied statistics, econometrics, and engineering. The Handbook of Financial Risk Management is also an excellent text or supplement for graduate and MBA-level students in courses on financial risk management and simulation.

A Benchmark Approach to Quantitative Finance

A Benchmark Approach to Quantitative Finance
Author: Eckhard Platen
Publisher: Springer Science & Business Media
Total Pages: 704
Release: 2006-10-28
Genre: Business & Economics
ISBN: 3540478566

A framework for financial market modeling, the benchmark approach extends beyond standard risk neutral pricing theory. It permits a unified treatment of portfolio optimization, derivative pricing, integrated risk management and insurance risk modeling. This book presents the necessary mathematical tools, followed by a thorough introduction to financial modeling under the benchmark approach, explaining various quantitative methods for the fair pricing and hedging of derivatives.

Monte Carlo Methods in Financial Engineering

Monte Carlo Methods in Financial Engineering
Author: Paul Glasserman
Publisher: Springer Science & Business Media
Total Pages: 603
Release: 2013-03-09
Genre: Mathematics
ISBN: 0387216170

From the reviews: "Paul Glasserman has written an astonishingly good book that bridges financial engineering and the Monte Carlo method. The book will appeal to graduate students, researchers, and most of all, practicing financial engineers [...] So often, financial engineering texts are very theoretical. This book is not." --Glyn Holton, Contingency Analysis