Computation of Malliavin Greeks in Hybrid StochasticVolatility Models

2015-05-16
Yılmaz, Bilgi
Yolcu Okur, Yeliz
Contrary to Black-Scholes model in stochastic volatility models, the stock price’s volatility assumed to be a stochastic process and the Brownian motions of volatility and stock price process are correlated with each other. Moreover, in some models, called hybrid stochastic volatility models, the interest rate also assumed to be a stochastic process. Because of the stochastic volatility, stochastic interest rate and correlated Brownian motions, a closed form solution for the Greeks of the options usually do not exist. However, an approximated value can be computed by using Malliavin calculus tools and Monte Carlo simulations. In this study we compute the Malliavin Greeks in the setting of hybrid stochastic volatility models and analyze the effect of the correlation, among the Brownian motions, on these Greeks.
Citation Formats
B. Yılmaz and Y. Yolcu Okur, “Computation of Malliavin Greeks in Hybrid StochasticVolatility Models,” presented at the 55th Meeting of the EWGCFM (2015), Ankara, Türkiye, 2015, Accessed: 00, 2021. [Online]. Available: https://hdl.handle.net/11511/71189.