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311. Accelerated Static Hedging Method for Pricing American Options
Invited abstract in session MD-57: Methodology in asset allocation and banking, stream Modern Decision Making in Finance and Insurance.
Monday, 14:30-16:00Room: S06 (building: 101)
Authors (first author is the speaker)
| 1. | Lung-fu Chang
|
| Department of Finance, National Taipei University of Business |
Abstract
This article provides an accelerated static hedge portfolio (SHP) method for evaluating American options based on stochastic volatility and double jump processes. Our proposed model is a generalization of the static hedge portfolio approach of Derman, Ergener, and Kani to evaluate American options based on the Richardson extrapolation. Numerical results show that the numerical efficiency of our accelerated static hedge portfolio approach is comparable to the least-squares Monte Carlo simulation method. Numerical results demonstrate that our proposed method is efficient and accuracy in evaluating American options with stochastic volatility and double jump processes.
Keywords
- Financial Modelling
- Stochastic Models
- Simulation
Status: accepted
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