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Journal Articles Int. J. Math. Anal. Year : 2014

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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Dates and versions

hal-03135016 , version 1 (08-02-2021)

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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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