Asymptotic computation of Greeks under a stochastic volatility model

Kiseop Lee; Sang Hyeon Park

한국통계학회 CSAM(Communications for Statistical Applications and Methods) Asymptotic computation of Greeks under a stochastic volatility model

KCI 등재 SCOPUS

( Sang Hyeon Park ) , ( Kiseop Lee )

한국통계학회 2016.01

CSAM(Communications for Statistical Applications and Methods) 23권 1호 21-32(12pages)

UCI I410-ECN-0102-2016-310-000470853

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초록

We study asymptotic expansion formulae for numerical computation of Greeks (i.e. sensitivity) in finance.Our approach is based on the integration-by-parts formula of the Malliavin calculus. We propose asymptotic expansion of Greeks for a stochastic volatility model using the Greeks formula of the Black-Scholes model.A singular perturbation method is applied to derive asymptotic Greeks formulae. We also provide numerical simulation of our method and compare it to the Monte Carlo finite difference approach.

키워드

computation of Greeks

asymptotics

stochastic volatility

singular perturbation

Malliavin calculus

1. Introduction
2. Malliavin calculus and a computation of Greeks
3. Fast mean-reverting OU volatility model and singular perturbation method
4. Numerical results
5. Conclusion
References

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