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http://hdl.handle.net/10071/12319
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Title: The binomial CEV model and the Greeks
Authors: Cruz, A.
Dias, J. C.
Issue Date: 2017
Publisher: Wiley-Blackwell
Abstract: This article compares alternative binomial approximation schemes for computing the option hedge ratios studied by Chung and Shackleton (2002), Chung, Hung, Lee, and Shih (2011), and Pelsser and Vorst (1994) under the lognormal assumption, but now considering the constant elasticity of variance (CEV) process proposed by Cox (1975) and using the continuous-time analytical Greeks recently offered by Larguinho, Dias, and Braumann (2013) as the benchmarks. Among all the binomial models considered in this study, we conclude that an extended tree binomial CEV model with the smooth and monotonic convergence property is the most efficient method for computing Greeks under the CEV diffusion process because one can apply the two-point extrapolation formula suggested by Chung et al. (2011)
Peer reviewed: yes
URI: http://hdl.handle.net/10071/12319
DOI: 10.1002/fut.21791
ISSN: 0270-7314
Ciência-IUL: https://ciencia.iscte-iul.pt/id/ci-pub-29295
Accession number: WOS:000389461700005
Appears in Collections:BRU-RI - Artigos em revistas científicas internacionais com arbitragem científica

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