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Quantization of stochastic volatility models: Numerical tests and an open source implementation

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  • Fina, Alessandro
  • Gnoatto, Alessandro
  • Picarelli, Athena

Abstract

The aim of this paper is to discuss the implementation of the recursive marginal quantization algorithm of Fiorin et al. (2018), to several stochastic volatility models. After recalling the theoretical framework and the main features of the method, we evaluate the performance of the algorithm for the pricing of derivatives. We also discuss an open source implementation of the algorithm. For most models we consider, with the exception of the Stein and Stein model, recursive marginal quantization provides a viable alternative to Monte Carlo simulations.

Suggested Citation

  • Fina, Alessandro & Gnoatto, Alessandro & Picarelli, Athena, 2024. "Quantization of stochastic volatility models: Numerical tests and an open source implementation," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 225(C), pages 29-51.
    • Handle: RePEc:eee:matcom:v:225:y:2024:i:c:p:29-51
    DOI: 10.1016/j.matcom.2024.04.030
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    References listed on IDEAS

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