Local vega index and variance reduction methods
(2003) In Mathematical Finance 13(1). p.85-97- Abstract
- In this article we discuss a generalization of the Greek called vega which is used to study the stability of option prices and hedging portfolios with respect to the volatility in various models. We call this generalization the local vega index. We compute through Monte Carlo simulations this index in the cases of Asian options under the classical Black-Scholes setup. Simulation methods using Malliavin calculus and kernel density estimation are compared. Variance reduction methods are discussed.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/319252
- author
- Bermin, Hans-Peter LU ; Kohatsu-Higa, A and Montero, M
- organization
- publishing date
- 2003
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- option sensitivity, volatility structure
- in
- Mathematical Finance
- volume
- 13
- issue
- 1
- pages
- 85 - 97
- publisher
- Wiley-Blackwell
- external identifiers
-
- wos:000180794300007
- scopus:0141936533
- ISSN
- 1467-9965
- DOI
- 10.1111/1467-9965.00007
- language
- English
- LU publication?
- yes
- id
- 459086a0-01df-4636-a1c5-a2c6f9090ff2 (old id 319252)
- date added to LUP
- 2016-04-01 12:05:24
- date last changed
- 2022-04-21 02:20:14
@article{459086a0-01df-4636-a1c5-a2c6f9090ff2, abstract = {{In this article we discuss a generalization of the Greek called vega which is used to study the stability of option prices and hedging portfolios with respect to the volatility in various models. We call this generalization the local vega index. We compute through Monte Carlo simulations this index in the cases of Asian options under the classical Black-Scholes setup. Simulation methods using Malliavin calculus and kernel density estimation are compared. Variance reduction methods are discussed.}}, author = {{Bermin, Hans-Peter and Kohatsu-Higa, A and Montero, M}}, issn = {{1467-9965}}, keywords = {{option sensitivity; volatility structure}}, language = {{eng}}, number = {{1}}, pages = {{85--97}}, publisher = {{Wiley-Blackwell}}, series = {{Mathematical Finance}}, title = {{Local vega index and variance reduction methods}}, url = {{http://dx.doi.org/10.1111/1467-9965.00007}}, doi = {{10.1111/1467-9965.00007}}, volume = {{13}}, year = {{2003}}, }