A Sequential Monte Carlo Approach for the pricing of barrier option in a Stochastic Volatility Model


In this paper we propose a numerical scheme to estimate 
the price of a barrier option in a general framework. 
More precisely, we extend a classical Sequential 
Monte Carlo approach, developed under the hypothesis 
of deterministic volatility, to Stochastic Volatility models, 
in order to improve the efficiency of Standard Monte Carlo
 techniques in the case of barrier options whose underlying
 approaches the barriers. The paper concludes with the 
application of our procedure to two case studies in 
a SABR model. 

DOI Code: 10.1285/i20705948v13n1p128

Keywords: Barrier Options; Stochastic Volatility; Sequential Monte Carlo methods; Bayesian re-sampling techniques; SABR model


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