Singular Exotic Perturbation

18 Pages Posted: 15 Jun 2021

Date Written: May 2021

Abstract

The Local Stochastic Volatility model is the main model used to take into account the correct pricing and hedging with the volatility dynamic.

We introduce a new methodology that combines Singular perturbation analysis and exotic greek computation. We obtain asymptotic formulae for the LSV impact which work extremely well. Tests are performed on the mostly traded Autocalls in the equity derivatives business.

Keywords: LSV, LV, Singular perturbation, Price adjustment, Exotic greeks, Fast pricing

JEL Classification: C13, C61, C63, G12, G13

Suggested Citation

Monciaud, Florian and Reghai, Adil, Singular Exotic Perturbation (May 2021). Available at SSRN: https://ssrn.com/abstract=3860721 or http://dx.doi.org/10.2139/ssrn.3860721

Florian Monciaud

Independent

Adil Reghai (Contact Author)

Natixis ( email )

France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
175
Abstract Views
388
rank
212,465
PlumX Metrics