arXiv subjects

Iben Cathrine Simonsen

Publications and source records attributed to Iben Cathrine Simonsen.

2 recordsLinked to original sources

arXiv2020

Sensitivity analysis in the infinite dimensional Heston model

We consider the infinite dimensional Heston stochastic volatility model proposed in \arXiv:1706:03500. The price of a forward contract on a non-storable commodity is modelled by a generalized Ornstein-Uhlenbeck process in the Filipović space with this volatility. We prove different representation formulas for the forward price. Then we consider prices of options written on these forward contracts and we study sensitivity analysis with computation of the Greeks with respect to different parameters in the model. Since these parameters are infinite dimensional, we need to reinterpret the meaning of the Greeks. For this we use infinite dimensional Malliavin calculus and a randomization technique.

math.PR↗

arXiv2017

The Heston stochastic volatility model in Hilbert space

We extend the Heston stochastic volatility model to a Hilbert space framework. The tensor Heston stochastic variance process is defined as a tensor product of a Hilbert-valued Ornstein-Uhlenbeck process with itself. The volatility process is then defined by a Cholesky decomposition of the variance process. We define a Hilbert-valued Ornstein-Uhlenbeck process with Wiener noise perturbed by this stochastic volatility, and compute the characteristic functional and covariance operator of this process. This process is then applied to the modelling of forward curves in energy markets. Finally, we compute the dynamics of the tensor Heston volatility model when the generator is bounded, and study its projection down to the real line for comparison with the classical Heston dynamics.

math.PR↗