A path integral approach to closed-form option pricing formulas with applications to stochastic volatility and interest rate models

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dc.creatorLemmens, D.
dc.creatorWouters, M.
dc.creatorTempere, J.
dc.creatorFoulon, S.
dc.date2008-06-05
dc.date.accessioned2026-07-07T12:05:51Z
dc.date.available2026-07-07T12:05:51Z
dc.descriptionWe present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is demonstrated by extending the realm of closed-form option price formulas to the case where both the volatility and interest rates are stochastic. This flexibility is promising for the treatment of exotic options. Our new analytical formulas are tested with numerical Monte Carlo simulations.
dc.identifierhttps://arxiv.org/abs/0806.0932
dc.identifierhttp://arxiv.org/abs/0806.0932
dc.identifierPhys. Rev. E 78, 016101 (2008).
dc.identifierdoi:10.1103/PhysRevE.78.016101
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/208490
dc.subjectPricing of Securities
dc.subjectStatistical Mechanics
dc.subjectPhysics and Society
dc.titleA path integral approach to closed-form option pricing formulas with applications to stochastic volatility and interest rate models
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