Extension of the SWIFT option pricing scheme for european options calibration under Heston stochastic volatility model
A Heston model calibration technique is presented for European options under the Heston model. The novel Shannon Wavelets Inverse Fourier Technique (SWIFT) is extended for European option price calibration (previously it was used only for pricing European, Asian, barrier, and Bermudan options). This...
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| Tipo de recurso: | tesis de maestría |
| Fecha de publicación: | 2020 |
| País: | España |
| Institución: | Universitat Politècnica de Catalunya (UPC) |
| Repositorio: | UPCommons. Portal del coneixement obert de la UPC |
| Idioma: | inglés |
| OAI Identifier: | oai:upcommons.upc.edu:2117/328148 |
| Acceso en línea: | https://hdl.handle.net/2117/328148 |
| Access Level: | acceso abierto |
| Palabra clave: | Mathematical economics Options Trading Heston SWIFT Calibration Inverse Fourier Option Valuation Matemàtica financera Classificació AMS::91 Game theory, economics, social and behavioral sciences::91B Mathematical economics Àrees temàtiques de la UPC::Matemàtiques i estadística::Matemàtica financera |
| Sumario: | A Heston model calibration technique is presented for European options under the Heston model. The novel Shannon Wavelets Inverse Fourier Technique (SWIFT) is extended for European option price calibration (previously it was used only for pricing European, Asian, barrier, and Bermudan options). This method has different expressions and speed-up techniques, adequate to different set-ups. These are discussed and new expressions and properties are presented for the gradient computation and option calibration. The Heston characteristic function expression recently proposed by \cite{cui17} is used in the SWIFT implementation due to its analytic gradient and its continuity properties. The time performance, robustness, and convergence under set-ups representative of real markets is studied for different implementations of the SWIFT technique and compared with the option calibration scheme presented by \cite{cui17} The SWIFT implementations are coded in C++ and uploaded to a public GitHub repository. The libray implements several of the different SWIFT expressions for GBM and Heston European options. |
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