446. An Accelerated Static Hedging Method for the Analytic Valuation of American Options
Invited abstract in session TB-54: Stochastic Models and Simulation, stream Stochastic modelling.
Tuesday, 10:30-12:00Room: Liberty 1.08
Authors (first author is the speaker)
| 1. | Lung-fu Chang
|
| Department of Finance, National Taipei University of Business | |
| 2. | Jia-Hau Guo
|
| Department of Information Management and Finance, National Yang Ming Chiao Tung University | |
| 3. | Mao-Wei Hung
|
| National Taiwan University |
Abstract
This article proposes 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 by utilizing the Richardson extrapolation. Numerical results demonstrate that the numerical efficiency of our accelerated static hedge portfolio approach is comparable to the least-squares Monte Carlo simulation method. Numerical results reveal that our proposed method is efficient and accuracy in evaluating American options with stochastic volatility and double jump processes.
Keywords
- Financial Modelling
- Stochastic Models
- Risk Analysis and Management
Status: accepted
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