Sample Path Generation of the Stochastic Volatility CGMY Process and Its Application to Path-Dependent Option Pricing

Young Shin Kim

doi:10.3390/jrfm14020077

Sample Path Generation of the Stochastic Volatility CGMY Process and Its Application to Path-Dependent Option Pricing

Young Shin Kim

Dean's Office, College of Business

Stony Brook University

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

This paper proposes the sample path generation method for the stochastic volatility version of the CGMY process. We present the Monte-Carlo method for European and American option pricing with the sample path generation and calibrate model parameters to the American style S&P 100 index options market, using the least square regression method. Moreover, we discuss path-dependent options, such as Asian and Barrier options.

Original language	English
Article number	77
Journal	Journal of Risk and Financial Management
Volume	14
Issue number	2
DOIs	https://doi.org/10.3390/jrfm14020077
State	Published - Feb 2021

Keywords

American option
Lévy process
Monte-Carlo simulation
barrier option
stochastic volatility

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10.3390/jrfm14020077

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abstract = "This paper proposes the sample path generation method for the stochastic volatility version of the CGMY process. We present the Monte-Carlo method for European and American option pricing with the sample path generation and calibrate model parameters to the American style S\&P 100 index options market, using the least square regression method. Moreover, we discuss path-dependent options, such as Asian and Barrier options.",

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AB - This paper proposes the sample path generation method for the stochastic volatility version of the CGMY process. We present the Monte-Carlo method for European and American option pricing with the sample path generation and calibrate model parameters to the American style S&P 100 index options market, using the least square regression method. Moreover, we discuss path-dependent options, such as Asian and Barrier options.

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KW - Lévy process

KW - Monte-Carlo simulation

KW - barrier option

KW - stochastic volatility

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U2 - 10.3390/jrfm14020077

DO - 10.3390/jrfm14020077

M3 - Article

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JO - Journal of Risk and Financial Management

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Sample Path Generation of the Stochastic Volatility CGMY Process and Its Application to Path-Dependent Option Pricing

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Keywords

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