2014
DOI: 10.1155/2014/784386
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Pricing Arithmetic Asian Options under Hybrid Stochastic and Local Volatility

Abstract: Recently, hybrid stochastic and local volatility models have become an industry standard for the pricing of derivatives and other problems in finance. In this study, we use a multiscale stochastic volatility model incorporated by the constant elasticity of variance to understand the price structure of continuous arithmetic average Asian options. The multiscale partial differential equation for the option price is approximated by a couple of single scale partial differential equations. In terms of the elasticit… Show more

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Cited by 2 publications
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“…To date, there have been a number of applications of this hybrid model to the pricing of derivatives. Refer to Choi et al [9] and Bock et al [10] for European options and Lee et al [11] for Asian options.…”
Section: Introductionmentioning
confidence: 99%
“…To date, there have been a number of applications of this hybrid model to the pricing of derivatives. Refer to Choi et al [9] and Bock et al [10] for European options and Lee et al [11] for Asian options.…”
Section: Introductionmentioning
confidence: 99%