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A Fast Fourier Transform Technique for Pricing European Options with Stochastic Volatility and Jump Risk
Joint Authors
Source
Mathematical Problems in Engineering
Issue
Vol. 2012, Issue 2012 (31 Dec. 2012), pp.1-17, 17 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2012-02-27
Country of Publication
Egypt
No. of Pages
17
Main Subjects
Abstract EN
We consider European options pricing with double jumps and stochastic volatility.
We derived closed-form solutions for European call options in a double exponential jump-diffusion model with stochastic volatility (SVDEJD).
We developed fast and accurate numerical solutions by using fast Fourier transform (FFT) technique.
We compared the density of our model with those of other models, including the Black-Scholes model and the double exponential jump-diffusion model.
At last, we analyzed several effects on option prices under the proposed model.
Simulations show that the SVDEJD model is suitable for modelling the long-time real-market changes and stock returns are negatively correlated with volatility.
The model and the proposed option pricing method are useful for empirical analysis of asset returns and managing the corporate credit risks.
American Psychological Association (APA)
Zhang, Su-mei& Wang, Li-he. 2012. A Fast Fourier Transform Technique for Pricing European Options with Stochastic Volatility and Jump Risk. Mathematical Problems in Engineering،Vol. 2012, no. 2012, pp.1-17.
https://search.emarefa.net/detail/BIM-1001898
Modern Language Association (MLA)
Zhang, Su-mei& Wang, Li-he. A Fast Fourier Transform Technique for Pricing European Options with Stochastic Volatility and Jump Risk. Mathematical Problems in Engineering No. 2012 (2012), pp.1-17.
https://search.emarefa.net/detail/BIM-1001898
American Medical Association (AMA)
Zhang, Su-mei& Wang, Li-he. A Fast Fourier Transform Technique for Pricing European Options with Stochastic Volatility and Jump Risk. Mathematical Problems in Engineering. 2012. Vol. 2012, no. 2012, pp.1-17.
https://search.emarefa.net/detail/BIM-1001898
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1001898