Abstract
Valuation of an option plays an important role in modern finance. As the financial market for derivatives continues to grow, the progress and the power of option pricing models at predicting the value of option premium are under investigations. In this paper, we assume that the volatility of the stock price follows an uncertain differential equation and propose an uncertain counterpart of the Heston model. This study also focuses on deriving a numerical method for pricing a European option under uncertain volatility model, and some numerical experiments are presented. Numerical experiments confirm that the developed methods are very efficient.
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Acknowledgements
The authors would like to thank the editor and two anonymous referees for helpful comments on an earlier version of this paper. The authors would like to thank Iran National Science Foundation (INSF) for supporting this research under project number 95843696.
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Hassanzadeh, S., Mehrdoust, F. Valuation of European option under uncertain volatility model. Soft Comput 22, 4153–4163 (2018). https://doi.org/10.1007/s00500-017-2633-4
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DOI: https://doi.org/10.1007/s00500-017-2633-4