Finite Element Based Monte Carlo Simulation of Options on Lévy Driven Assets
(2018) In International Journal of Financial Engineering 05(01).- Abstract
- This paper extends the simulation algorithm by Andreasen & Huge (2011) to the simulation of option prices and deltas on Lévy driven assets. The simulation is performed relying on the inverse transition matrix of the discretized PDE. Each row describes the evolution of option prices and can thus be seen as the underlying’s transition probability distribution. We demonstrate how one can get accurate prices and deltas of European options on VG and CGMY via Monte Carlo simulations.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/da30a5f1-faa0-4f5e-acd6-dc77a20eeda0
- author
- Karlsson, Patrik LU
- organization
- publishing date
- 2018
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- computational finance, derivative pricing, finite element method, Monte Carlo simulation, Lévy processes
- in
- International Journal of Financial Engineering
- volume
- 05
- issue
- 01
- article number
- 1850013
- publisher
- World Scientific Publishing
- ISSN
- 2345-7686
- DOI
- 10.2139/ssrn.2721095
- language
- English
- LU publication?
- yes
- id
- da30a5f1-faa0-4f5e-acd6-dc77a20eeda0
- date added to LUP
- 2017-02-12 12:07:31
- date last changed
- 2020-04-09 11:01:44
@article{da30a5f1-faa0-4f5e-acd6-dc77a20eeda0, abstract = {{This paper extends the simulation algorithm by Andreasen & Huge (2011) to the simulation of option prices and deltas on Lévy driven assets. The simulation is performed relying on the inverse transition matrix of the discretized PDE. Each row describes the evolution of option prices and can thus be seen as the underlying’s transition probability distribution. We demonstrate how one can get accurate prices and deltas of European options on VG and CGMY via Monte Carlo simulations.}}, author = {{Karlsson, Patrik}}, issn = {{2345-7686}}, keywords = {{computational finance; derivative pricing; finite element method; Monte Carlo simulation; Lévy processes}}, language = {{eng}}, number = {{01}}, publisher = {{World Scientific Publishing}}, series = {{International Journal of Financial Engineering}}, title = {{Finite Element Based Monte Carlo Simulation of Options on Lévy Driven Assets}}, url = {{http://dx.doi.org/10.2139/ssrn.2721095}}, doi = {{10.2139/ssrn.2721095}}, volume = {{05}}, year = {{2018}}, }