"Probability Distribution and Option Pricing for Drawdown in a Stochastic Volatility Environment"

This paper studies the probability distribution and option pricing for drawdown in a stochastic volatility environment. We derive an analytical approximation formula for them by applying a singular perturbation method ([12]). Then, numerical examples show that the instantaneous correlation between the asset value and the volatility state crucially affects the probability distribution and option prices for drawdown.

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Year of publication:	2008-10
Authors:	Yamamoto, Kyo ; Sato, Seisho ; Takahashi, Akihiko
Institutions:	Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics

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Series:	CIRJE F-Series.
Type of publication:	Book / Working Paper
Notes:	Number CIRJE-F-596 15 pages longages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005465334