Recent Developments in Option Pricing

Hui Gong, You Liang, Aerambamoorthy Thavaneswaran

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DOI: 10.4236/jmf.2011.13009                

Abstract

In this paper, we investigate recent developments in option pricing based on Black-Scholes processes, pure jump processes, jump diffusion process, and stochastic volatility processes. Results on Black-Scholes model with GARCH volatility (Gong, Thavaneswaran and Singh [1]) and Black-Scholes model with stochastic volatility (Gong, Thavaneswaran and Singh [2]) are studied. Also, recent results on option pricing for jump diffusion processes, partial differential equation (PDE) method together with FFT (fast Fourier transform) approximations of Pillay and O’ Hara [3] and a recently proposed method based on moments of truncated lognormal distribution (Thavaneswaran and Singh [4]) are also discussed in some detail.

Keywords

Stochastic Volatility, Black-Scholes Partial Differential Equations, Option Pricing, Monte Carlo

Conflicts of Interest

The authors declare no conflicts of interest.

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