Numerical Methods for the Valuation of Accumulators under Local Volatility

19 Pages Posted: 15 Nov 2012 Last revised: 28 Jan 2013

Date Written: November 13, 2012

Abstract

Under the local volatility model, the convergence of Monte-Carlo with Milstein discretization and Euler discretization are compared for the pricing of Vanilla, Digital, discrete Barrier options as well as a more exotic variety of option, the Accumulator. A finite difference approach is also studied. Parametric and Non-Parametric local volatility models are examined.

Keywords: Option, Finance, Local Volatility, Monte-Carlo, Milstein, Euler, Accumulator, Displaced Diffusion

Suggested Citation

Le Floc'h, Fabien, Numerical Methods for the Valuation of Accumulators under Local Volatility (November 13, 2012). Available at SSRN: https://ssrn.com/abstract=2175090 or http://dx.doi.org/10.2139/ssrn.2175090

Fabien Le Floc'h (Contact Author)

Calypso Technology ( email )

106 rue de la Boetie
Paris, 75008
France

Independent ( email )

France

Register to save articles to
your library

Register

Paper statistics

Downloads
506
Abstract Views
1,789
rank
55,587
PlumX Metrics