The continuity and estimates of a solution to mixed fractional constant elasticity of variance system with stochastic volatility and the pricing of vulnerable options

oleh: Yan Dong

Format: Article
Diterbitkan: SpringerOpen 2019-08-01

Deskripsi

Abstract Stochastic volatility models play an important role in finance modeling. Under a mixed fractional Brownian motion environment, we study the continuity and estimates of a solution to a kind of stochastic differential equations with double volatility terms. Besides, we propose to price the vulnerable option with the discretization method and present the results using a Monte Carlo simulation.