Option pricing and hedging for optimized Lévy driven stochastic volatility models

Gong, Xiao-Li; Xin-tian, Zhuang

doi:10.1016/j.chaos.2016.05.012

Cited by 3 publications

(3 citation statements)

References 41 publications

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“…The larger the G, the more accurate the optimal solution and the longer the calculation time. (3) The variation factor F is between 0 and 2, usually 0.7. (4) Crossover probability CR, between 0 and 1, usually takes 0.4.…”

Section: Principle Of the Differential Evolution Algorithm X Igmentioning

confidence: 99%

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Correlation Financial Option Pricing Model and Computer Simulation under a Stochastic Interest Rate

Yin¹

2022

Wireless Communications and Mobile Computing

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With the continuous expansion of the consumer interest rate market today, the risks brought by interest rate fluctuations have had a huge and far-reaching impact on the financial markets of many countries and it is becoming more and more important to simulate the pricing of financial options. In the traditional pricing model of financial options, the pricing standard of the pricing model is generally set as a financial product with random disturbance characteristics and the market price of its transaction does not follow the arbitrage principle of financial product pricing. It is easy to generate errors and cause risks, and the accuracy of traditional financial option pricing models is not high, and the simulation time is long, which greatly reduces the rate of financial transactions. To improve the accuracy of option pricing models, this paper uses computer simulation technology to simulate the pricing of correlated financial options under stochastic interest rates. From the four aspects of error, risk parameters, success rate, and simulation time, it is tested to observe the influence of computer simulation technology on the financial option pricing model. The final results show that by using computer simulation technology, the error of the correlation financial option pricing model under the random interest rate is reduced, the success rate is improved, the risk parameter is reduced by 3.03%, and the simulation time is reduced by 0.605 seconds.

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Section: Principle Of the Differential Evolution Algorithm X Igmentioning

confidence: 99%

“…The method can be easily extended to other alternative-valued models with clear algebraic systems. Further results can be generated using various functional forms of the rate and index text structures [3]. Dubinsky et al proposed a fuzzy pricing model for the volatility (fuzzy volatility) in the binary tree option pricing model.…”

Section: Introductionmentioning

confidence: 99%

Correlation Financial Option Pricing Model and Computer Simulation under a Stochastic Interest Rate

Yin¹

2022

Wireless Communications and Mobile Computing

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“…Nevertheless, recent studies show that financial market displays complex and nonlinear characters linked to common and specific assets risk taking (e.g. Gong and Zhuang, 2016; Hull and White, 2017). Recently, financial markets show new financial assets that exhibit different risk-return structure compared to standard assets, such as Islamic indexes.…”

Section: Introductionmentioning

confidence: 99%

Risk-sharing finance governance: Islamic vs conventional indexes option pricing

Hamdi

Majdoub

2018

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Purpose Risk governance has an important influence on the hedging performances in option pricing and portfolio hedging in both discrete and dynamic case for both conventional and Islamic indexes. The paper aims to discuss these issues. Design/methodology/approach This paper explores option pricing and portfolio hedging in a discrete and dynamic case with transaction costs. Monte Carlo simulations are applied to both conventional and Islamic indexes in US and UK markets. Simulations show that conventional and Islamic assets do not exhibit the same price and portfolio hedging strategy governance. Findings The authors conclude that Islamic assets show different option price and hedging strategy compared to their conventional counterpart. Originality/value The research question of this paper aims at filling the gap in the empirical literature by exploring option price and hedging structure for both conventional and Islamic indexes in US and UK stock markets.

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