Pricing discrete timer options under stochastic volatility models
主 题: Pricing discrete timer options under stochastic volatility models
报告人: Prof. Yue Kuen KWOK, (Hong Kong University of Science and Technology, Hong Kong)
时 间: 2015-12-29 16:00-17:00
地 点: 理科1号楼 1493
Timer options are barrier style options in the volatility space. A typical timer option is similar to its European vanilla counterpart, except with uncertain expiration date. The finite-maturity timer option expires either when the accumulated realized variance of the underlying asset has reached a pre-specified level or on the mandated expiration date, whichever comes earlier. The challenge in the pricing procedure is the incorporation of the barrier feature in terms of the accumulated discrete realized variance instead of the usual knock-out feature of hitting a barrier by the underlying asset price. We present two approaches for constructing efficient and accurate fast Fourier transform algorithms for pricing finite-maturity discrete timer options under different types of stochastic volatility processes. The stochastic volatility processes nest some popular stochastic volatility models, like the Heston model and 3/2 stochastic volatility model. Our numerical tests demonstrate high level of accuracy of the numerical algorithms. We also explore the pricing properties of the timer options with respect to various parameters, like volatility of variance, correlation coefficient between the asset price process and instantaneous variance process, sampling frequency, and variance budget. This is a joint work with Pingping ZENG and Wendong ZHENG. 报告人介绍: Yue Kuen Kwok (郭宇权) is a Professor in the Department of Mathematics, the Hong Kong University of Science and Technology (HKUST). He is currently the Program Director of MSc degree in Financial Mathematics as well as MSc degree in Mathematics and Economics at HKUST. Professor Kwok’s research interests concentrate on pricing and risk management of equity and fixed income derivatives. He has published more than 100 research articles in major research journals in financial mathematics and mathematical sciences. In addition, he is the author of the book titled “Mathematical Models of Financial Derivatives”, second edition, (2008) published by Springer. He has provided consulting services to a number of financial institutions on various aspects of derivative trading and credit risk management. He has served in the editorial board of Journal of Economic and Dynamics Control and Asian-Pacific Financial Markets. Yue Kuen Kwok received his PhD degree in Applied Mathematics from Brown University in 1985.