Journal of Guangxi Normal University(Natural Science Edition) ›› 2016, Vol. 34 ›› Issue (2): 90-97.doi: 10.16088/j.issn.1001-6600.2016.02.013

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Monte Carlo Simulations with Dual Variables Pricing of Barrier Optionsin a Stochastic Volatility Model

WEN Xian1, DENG Guohe2   

  1. 1. Lushan College, Guangxi University of Science and Technology, Liuzhou Guangxi, 545616, China;
    2.College of Mathematics and Statistics, Guangxi Normal University, Guilin Guangxi, 541004, China
  • Received:2015-09-09 Online:2016-06-25 Published:2018-09-14

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Abstract: In order to overcome the "smile" effect of the implied volatility of the stock market price and to make it fit with the market price, the pricing problem of an European barrier option is considered in stochastic volatility model. The pricing algorithm of European barrier option, the path of the volatility process and the path of the stock price are given by using the dual variable method. Then, the estimator of this option is provided. Finally, numerical examples using the finite difference method are provided to verify the accuracy of using Monte Carlo simulation with dual variable techniques.

Key words: stochastic volatility, dual variable technique, barrier option

CLC Number: 

  • O211.6
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