{"title":"Sato two factor models for multivariate option pricing","authors":"Florence Guillaume","doi":"10.21314/JCF.2012.248","DOIUrl":null,"url":null,"abstract":"This paper provides a multivariate Sato model for multivariate option pricing where the asset log-returns are expressed as Sato time changed Brownian motions and where the time change is the weighted sum of a common and an idiosyncratic component. This model presents the main advantage that it allows to replicate univariate option prices in both the strike and time to maturity dimensions. In particular it is able to t both the univariate option surfaces and the asset log-return dependence structure with high precision for a period ranging from June 2008 until October 2009 including therefore the credit crisis period.","PeriodicalId":51731,"journal":{"name":"Journal of Computational Finance","volume":"17 1","pages":"159-192"},"PeriodicalIF":0.8000,"publicationDate":"2012-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"19","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Computational Finance","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.21314/JCF.2012.248","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 19
Abstract
This paper provides a multivariate Sato model for multivariate option pricing where the asset log-returns are expressed as Sato time changed Brownian motions and where the time change is the weighted sum of a common and an idiosyncratic component. This model presents the main advantage that it allows to replicate univariate option prices in both the strike and time to maturity dimensions. In particular it is able to t both the univariate option surfaces and the asset log-return dependence structure with high precision for a period ranging from June 2008 until October 2009 including therefore the credit crisis period.
期刊介绍：
The Journal of Computational Finance is an international peer-reviewed journal dedicated to advancing knowledge in the area of financial mathematics. The journal is focused on the measurement, management and analysis of financial risk, and provides detailed insight into numerical and computational techniques in the pricing, hedging and risk management of financial instruments. The journal welcomes papers dealing with innovative computational techniques in the following areas: Numerical solutions of pricing equations: finite differences, finite elements, and spectral techniques in one and multiple dimensions. Simulation approaches in pricing and risk management: advances in Monte Carlo and quasi-Monte Carlo methodologies; new strategies for market factors simulation. Optimization techniques in hedging and risk management. Fundamental numerical analysis relevant to finance: effect of boundary treatments on accuracy; new discretization of time-series analysis. Developments in free-boundary problems in finance: alternative ways and numerical implications in American option pricing.
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