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Findings from Technical University Broaden Understanding of Derivatives Research (Efficiently pricing double barrier derivatives in stochastic...

July 8, 2014



Findings from Technical University Broaden Understanding of Derivatives Research (Efficiently pricing double barrier derivatives in stochastic volatility models)

By a News Reporter-Staff News Editor at Journal of Mathematics -- Investigators publish new report on Derivatives Research. According to news reporting originating from Garching, Germany, by VerticalNews correspondents, research stated, "Imposing a symmetry condition on returns, Carr and Lee (Math Financ 19(4):523-560, 2009) show that (double) barrier derivatives can be replicated by a portfolio of European options and can thus be priced using fast Fourier techniques (FFT)."

Our news editors obtained a quote from the research from Technical University, "We show that prices of barrier derivatives in stochastic volatility models can alternatively be represented by rapidly converging series, putting forward an idea by Hieber and Scherer (Stat Probab Lett 82(1):165-172, 2012). This representation turns out to be faster and more accurate than FFT."

According to the news editors, the research concluded: "Numerical examples and a toolbox of a large variety of stochastic volatility models illustrate the practical relevance of the results."

For more information on this research see: Efficiently pricing double barrier derivatives in stochastic volatility models. Review of Derivatives Research, 2014;17(2):191-216. Review of Derivatives Research can be contacted at: Springer, 233 Spring St, New York, NY 10013, USA. (Springer - www.springer.com; Review of Derivatives Research - www.springerlink.com/content/1380-6645/)

The news editors report that additional information may be obtained by contacting M. Escobar, Technical University of Munich, Lehrstuhl Finanzmath M13, D-85748 Garching, Germany. Additional authors for this research include P. Hieber and M. Scherer.

Keywords for this news article include: Europe, Germany, Garching, Derivatives Research

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Source: Journal of Mathematics


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