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Stochastic Runge-Kutta methods with the constant elasticity of variance (CEV) diffusion model for pricing option

Abstract : In order to solve numerically the constant elasticity of variance (CEV) model for pricing of European call option, we propose in this work the Stochastic Runge-Kutta method. We compare the obtained results using this approache, with those given by the Monte Carlo method in Broadie-Kaya [4]. Further, we demonstrate the faster convergence rate of the error obtained by the proposed method. Finally a comparative numerical study is done using different values of the coefficient of elasticity
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https://hal-uphf.archives-ouvertes.fr/hal-03135016
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Submitted on : Monday, February 8, 2021 - 4:31:50 PM
Last modification on : Tuesday, July 5, 2022 - 3:32:37 AM

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Rajae Aboulaich, Abdelilah Jraifi, Medarhri Ibtissam. Stochastic Runge-Kutta methods with the constant elasticity of variance (CEV) diffusion model for pricing option. Int. J. Math. Anal. , 2014, 8 (18), pp.849-856. ⟨10.12988/ijma.2014.4381⟩. ⟨hal-03135016⟩

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