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A Numerical Approach to Pricing Exchange Options under Stochastic Volatility and Jump-Diffusion Dynamics
Gerald H. L. Cheang / Len Patrick Dominic M. Garces
jump processes / numerical methodsResource overview

A Numerical Approach to Pricing Exchange Options under Stochastic Volatility and Jump-Diffusion Dynamics

Paper2021

by Gerald H. L. Cheang, Len Patrick Dominic M. Garces

Tags
jump processesnumerical methodsoption pricingpartial differential equations

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Suggested foundations for volatility models and surfaces and optimisation and numerical methods. Specialist prerequisites vary by paper.

Before you read

  1. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow diffusion-based models and their assumptions.

  2. ARCH and GARCH

    Separate conditional volatility from observed returns.

  3. Vectors, Matrices and Linear Systems

    Read the linear algebra used to define a numerical problem.

  4. Constrained and Convex Optimisation

    Identify the objective, constraints and conditions for an optimum.

Go further

  1. Stochastic Volatility and the Heston Model

    Study a correlated stochastic-variance model.

  2. Reading the Implied Vol Surface — Moneyness, Term Structure, and Quoting Conventions

    Interpret prices across strikes and expiries.

  3. Calibration as an Inverse Problem

    Understand identifiability and fitted model parameters.

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Lesson links open public previews. Access to full lessons depends on the topic and your membership.

Explore Advanced Derivatives and Exotic Options Explore Linear Algebra, Optimisation and Numerical Methods

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