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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| Author: | S. Kruse |
|---|---|
| URN: | urn:nbn:de:hbz:386-kluedo-13241 |
| Series (Serial 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 first Publication: | 2003 |
| Publishing Institution: | Fraunhofer-Institut für Techno- und Wirtschaftsmathematik |
| Date of the Publication (Server): | 2004/02/10 |
| Tag: | Heston model; Option pricing; cliquet options; forward starting options; stochastic volatility |
| Faculties / Organisational entities: | Fraunhofer (ITWM) |
| DDC-Cassification: | 5 Naturwissenschaften und Mathematik / 510 Mathematik |
| Licence (German): |  Standard gemäß KLUEDO-Leitlinien vor dem 27.05.2011 |