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Asymptotic results for American option prices under extended Heston model
Mälardalen University, School of Education, Culture and Communication.
2019 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

In this thesis, we consider the pricing problem of an American put option. We introduce a new market model for the evolution of the underlying asset price. Our model adds a new parameter to the well known Heston model. Hence we name our model the extended Heston model. To solve the American put pricing problem we adapt the idea developed by Fouque et al. (2000) to derive the asymptotic formula. We then connect the idea developed by Medvedev and Scaillet (2010) to provide an asymptotic solution for the leading order term P0. We do numerical analysis to gain insight into the accuracy and validity of our asymptotic approximation formula.

Place, publisher, year, edition, pages
2019. , p. 37
Keywords [en]
American options; Stochastic Volatility; Extended Heston model; Fast mean–reversion volatility; Asymptotic expansion, Average Volatility
National Category
Mathematics
Identifiers
URN: urn:nbn:se:mdh:diva-46188OAI: oai:DiVA.org:mdh-46188DiVA, id: diva2:1373357
Subject / course
Mathematics/Applied Mathematics
Presentation
2019-11-04, U3-104, Västerås, 13:00 (English)
Supervisors
Examiners
Available from: 2019-11-27 Created: 2019-11-26 Last updated: 2019-11-27Bibliographically approved

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1415161718192017 of 37
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf