Explicit Solution Simulation Method for the 3/2 Model

@article{Kouarfate2021ExplicitSS,
  title={Explicit Solution Simulation Method for the 3/2 Model},
  author={Iro Ren'e Kouarfate and Michael A. Kouritzin and Anne Mackay},
  journal={Advances in Probability and Mathematical Statistics},
  year={2021}
}
An explicit weak solution for the 3/2 stochastic volatility model is obtained and used to develop a simulation algorithm for option pricing purposes. The 3/2 model is a non-affine stochastic volatility model whose variance process is the inverse of a CIR process. This property is exploited here to obtain an explicit weak solution, similarly to Kouritzin (2018). A simulation algorithm based on this solution is proposed and tested via numerical examples. The performance of the resulting pricing… 

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