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Log-Normal Stochastic Volatility Model: Moment Generating Function and Pricing of Vanilla Options

version 2.5.0.0 (32.3 KB) by Artur Sepp
Compute option prices under log-normal stochastic volatility model and calibrate model parameters

3 Downloads

Updated 23 May 2016

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% Implementation of the analytical approach for valuation of vanilla options under the log-normal stochastic volatility model
%
%Key functionality:
%
% 1) LogNormalBetaSVPricingMain for computing option prices and comparision to MC simulations
%
% 2) LogNormalBetaSVCalibrationMain for model calibration to market implied volatilities
%
% Implemented functionality in this file LogNormalBetaSVPricingMain:
%
% [1] Compute option prices in the lognormal beta SV model
% using Fourier inversion formulas with the moment generating function (MGF)
% computed by solving the system of ODE-s using:
% 1 - 4th order Runge-Kutta method (see the paper for analytical details) - preferable default method
% 2 - Rosenbrock stiff method
% 3 - Using Matlab ODE solver - slow and innacurate
% [2] Compute options prices by Monte-Carlo simulation of the log-normal SV model
% [3] Compare option prices between the analytic approach and MC simulation, and also implied volatilities from this prices
% [4] Supported are options on the equity and quadratic variance (QV)
% [5] Implemented jump size distributions: deterministic jumps in log-return and volatility
%
%
% Based on the paper:
% Sepp, A. (2016), Log-Normal Stochastic Volatility Model: Affine Decomposition of Moment Generating Function and Pricing of Vanilla Options
% Working paper available at SSRN: http://ssrn.com/abstract=2522425
%
% by Artur Sepp
% artursepp@gmail.com
% http://kodu.ut.ee/~spartak/
%
% Last Update: March 7, 2016
%
%
%
% This code is distributed via the mathworks file-exchange and it is covered by the BSD license
% This code is being provided solely for information and general illustrative purposes.
% The author will not be responsible for numbers produced from using the code.

Comments and Ratings (1)

York Yang

thanks very much

Updates

2.5.0.0

Refacturing

2.4.0.0

Some refacturing

2.2.0.0

Some Refacturing

2.1.0.0

Some refacturing

2.0.0.0

LogNormalBetaSVCalibrationMain for model calibration to market implied volatilities

LogNormalBetaSVPricingMain for computing option prices and comparision to MC simulations

1.71.0.0

V1.71

1.7.0.0

Updeted model parameters

1.6.0.0

V 1.6

1.5.0.0

V 1.4

1.4.0.0

v1.3

1.3.0.0

V1.2

1.2.0.0

v 1.1

1.1.0.0

Revision 1.1

MATLAB Release Compatibility
Created with R2014b
Compatible with any release
Platform Compatibility
Windows macOS Linux

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