The Black–Scholes equation in stochastic volatility models
Copyright policy )The Black–Scholes equation in stochastic volatility models
The purpose of this paper is to provide the precise connection between the risk-neutral expected value and the pricing PDE with appropriate boundary conditions for stochastic volatility models. This paper extends the one-dimensional results by the authors in [``Boundary conditions for the single-factor term structure equation'', Ann. Appl. Probab., in press] to a setting with two spatial dimensions.
- Uppsala universitet Sweden
- Uppsala University Sweden
Boundary conditions, Option pricing, Parabolic equations, Applied Mathematics, Feynman-Kac theorems, parabolic equations, Applications of stochastic analysis (to PDEs, etc.), Derivative securities (option pricing, hedging, etc.), Initial-boundary value problems for second-order parabolic equations, boundary conditions, Stochastic volatility, stochastic volatility, option pricing, Feynman–Kac theorems, Analysis
Boundary conditions, Option pricing, Parabolic equations, Applied Mathematics, Feynman-Kac theorems, parabolic equations, Applications of stochastic analysis (to PDEs, etc.), Derivative securities (option pricing, hedging, etc.), Initial-boundary value problems for second-order parabolic equations, boundary conditions, Stochastic volatility, stochastic volatility, option pricing, Feynman–Kac theorems, Analysis
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