On the Pricing of Forward Starting Options under Stochastic Volatility

  • We consider the problem of pricing European forward starting options in the presence of stochastic ­volatility. By performing a change of measure using the asset price at the time of strike determination as a numeraire, we derive a closed-form solution based on Heston’s model of stochastic volatility.

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Metadaten
Author:S. Kruse
URN (permanent link):urn:nbn:de:hbz:386-kluedo-13241
Serie (Series number):Berichte des Fraunhofer-Instituts für Techno- und Wirtschaftsmathematik (ITWM Report) (53)
Document Type:Report
Language of publication:English
Year of Completion:2003
Year of Publication:2003
Publishing Institute:Fraunhofer-Institut für Techno- und Wirtschaftsmathematik
Tag:Heston model; Option pricing; cliquet options; forward starting options; stochastic volatility
Faculties / Organisational entities:Fraunhofer (ITWM)
DDC-Cassification:510 Mathematik

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