Changes of measure for the square-root
stochastic volatility process
Daniel Dufresne
University of Melbourne
August 27 2010,
14:00-15:00
Salle/Room LB 921.04, Pavillon J.W. McConnell (Library) Building
SGW Campus, Concordia University
Résumé/Abstract: From empirical observations, many have come to consider that volatility
varies "randomly''. The square-root process is a well-known model for stochastic volatility. We
consider this process and its time integral as they occur in pricing options in stochastic volatility
models. An explicit measure change formula for the square- root process is used to price European
options. Numerical results show that the measure-change approach and Andersen's quadratic
exponential (QE) scheme perform similarly. We also examine the numerical behaviour of the
Radon-Nikodym derivative.
This is joint work with Stephen Chin, University of Melbourne.
Café/Coffee : 13:30
Organisé par: Groupe ISM en mathématiques actuarielles et financières
Organized by: ISM group in Actuarial and Financial Mathematics
www.dms.umontreal.ca/~morales/seminar_main.php