Communications for Statistical Applications and Methods

The Korean Statistical Society (한국통계학회)
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Asymptotic computation of Greeks under a stochastic volatility model

  • Received : 2015.08.16
  • Accepted : 2015.12.05
  • Published : 2016.01.31
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Abstract

We study asymptotic expansion formulae for numerical computation of Greeks (i.e. sensitivity) in finance. Our approach is based on the integration-by-parts formula of the Malliavin calculus. We propose asymptotic expansion of Greeks for a stochastic volatility model using the Greeks formula of the Black-Scholes model. A singular perturbation method is applied to derive asymptotic Greeks formulae. We also provide numerical simulation of our method and compare it to the Monte Carlo finite difference approach.

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References

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