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Local vega index and variance reduction methods

Bermin, Hans-Peter LU ; Kohatsu-Higa, A and Montero, M (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:
author
organization
publishing date
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
2007-08-23 08:58:48
date last changed
2018-05-29 12:31:35
@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},
  keyword      = {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},
  volume       = {13},
  year         = {2003},
}