Abstract

The probabilistic representation of parameter differentiations of diffusion semigroups using Malliavin calculus provides a kind of automatic differentiation method and is useful to estimate Greeks such as Delta and Vega in finance. In the talk, we introduce a second order discretization method for parameter differentiations in a general stochastic volatility model. A new algorithm is provided with an efficient simulation method. The effectiveness of the proposed method is checked through numerical examples under lognormal SABR model and Heston model. The talk is based on a joint work with Toshihiro Yamada.