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European Option Pricing under Wishart Processes

Author

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  • Raphael Naryongo
  • Philip Ngare
  • Anthony Waititu
  • Efthymios G. Tsionas

Abstract

This study deals with a single risky asset pricing model whose volatility is described by Wishart affine processes. This multifactor model with two dependency matrices describing the correlation between the asset dynamic and Wishart processes makes it more flexible enough to fit the market data for short or long maturities. The aim of the study is to derive and solve the call option pricing problem under the double Wishart stochastic volatility model. The Fourier transform techniques combined with perturbation methods are employed in order to price the European call options. The numerical illustrations on pricing predictions show similar behavior of price movements under the double Wishart model with respect to the market price.

Suggested Citation

  • Raphael Naryongo & Philip Ngare & Anthony Waititu & Efthymios G. Tsionas, 2021. "European Option Pricing under Wishart Processes," Journal of Mathematics, Hindawi, vol. 2021, pages 1-24, July.
    • Handle: RePEc:hin:jjmath:7411885
    DOI: 10.1155/2021/7411885
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