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  • P-ISSN1226-0657
  • E-ISSN2287-6081
  • KCI

ISSN : 1226-0657

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Vol.22 No.3

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Digital Option Pricing based on Copulas with Stochastic Simulation

Journal of the Korean Society of Mathematical Education Series B: The Pure and Applied Mathematics / Journal of the Korean Society of Mathematical Education Series B: The Pure and Applied Mathematics, (P)1226-0657; (E)2287-6081
2015, v.22 no.3, pp.299-313
https://doi.org/10.7468/jksmeb.2015.22.3.299
KIM, M.S.
KIM, SEKI
KIM,, M. , & KIM,, S. (2015). Digital Option Pricing based on Copulas with Stochastic Simulation. Journal of the Korean Society of Mathematical Education Series B: The Pure and Applied Mathematics, 22(3), 299-313, https://doi.org/10.7468/jksmeb.2015.22.3.299

Abstract

In this paper, we show the effectiveness of copulas by comparing the correlation of market data of year 2010 with those of years 2006-2009 and investigate copula functions as pricing methods of digital and rainbow options through real market data. We propose an accurate method of pricing rainbow options by using the correlation coefficients obtained from the copula functions depending on strike prices between assetes instead of simple traditional correlation coefficients.

keywords
copula, digital option, rainbow option, stochastic simulation.

Reference

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Pu, Yuqi;Kim, Seki;. (2014). Pricing Forward-Future Spread based on Copulas with Stochastic Simulation. The Pure and Applied Mathematics, 21, 77-93. 10.7468/jksmeb.2014.21.1.77.

Journal of the Korean Society of Mathematical Education Series B: The Pure and Applied Mathematics

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