• 대한수학회보
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• 제55권4호
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• pp.1241-1261
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• 2018

We derive discrete time model of the geometric fractional Brownian motion. It provides numerical pricing scheme of financial derivatives when the market is driven by geometric fractional Brownian motion. With the convergence analysis, we guarantee the convergence of Monte Carlo simulations. The strong convergence rate of our scheme has order H which is Hurst parameter. To obtain our model we need to convert Wick product term of stochastic differential equation into Wick free discrete equation through Malliavin calculus but ours does not include Malliavin derivative term. Finally, we include several numerical experiments for the option pricing.

• Journal of the Korean Society for Industrial and Applied Mathematics
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• 제18권1호
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• pp.61-74
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• 2014

This paper presents accurate and efficient numerical methods for calculating the sensitivities of two-asset European options, the Greeks. The Greeks are important financial instruments in management of economic value at risk due to changing market conditions. The option pricing model is based on the Black-Scholes partial differential equation. The model is discretized by using a finite difference method and resulting discrete equations are solved by means of an operator splitting method. For Delta, Gamma, and Theta, we investigate the effect of high-order discretizations. For Rho and Vega, we develop an accurate and robust automatic algorithm for finding an optimal value. A cash-or-nothing option is taken to demonstrate the performance of the proposed algorithm for calculating the Greeks. The results show that the new treatment gives automatic and robust calculations for the Greeks.