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Title: Speed and Accuracy Comparison of Noncentral Chi-Square Distribution Methods for Option Pricing and Hedging under the CEV Model
Authors: Larguinho, M.
Dias, J.C.
Braumann, C.A.
Keywords: CEV model
Option pricing
Non-central chi-square distribution
Issue Date: 2011
Publisher: Em: Conference Proceedings of 18th International Conference on Forecasting Financial Markets: Advances for Exchange Rates, Interest Rates and Asset Management (CD-ROM)
Abstract: Pricing options and evaluating greeks under the constant elasticity of variance (CEV) model require the computation of the noncentral chi-square distribution function. In this article, we compare the performance in terms of accuracy and computational time of alternative methods for computing such probability distributions against an xternally tested benchmark. In addition, we present closed-form solutions for computing greek measures under the CEV option pricing model for both beta < 2 and beta > 2, thus being able to accommodate direct leverage effects as well as inverse leverage effects that are frequently observed in the options markets.
Type: article
Appears in Collections:CIMA - Artigos em Livros de Actas/Proceedings
MAT - Artigos em Livros de Actas/Proceedings

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