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References for Simulating Heston Model Vega for Asian Options

Article Quant Q&A · Author: MS07
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Summary

The document asks for methods to simulate vega, the sensitivity of an option’s value to volatility, for an Asian option under the Heston stochastic-volatility model. It identifies Broadie and Kaya’s work as a source the questioner consulted, while noting that it does not appear to address the desired Greek directly. The response recommends a paper by Chan, Joshi, and Zhu on first- and second-order Greeks in the Heston model as a relevant reference.

The exchange provides a literature pointer rather than a derivation, implementation procedure, or numerical comparison. It does not specify an estimator, explain how to adapt the cited methods to path-dependent Asian payoffs, or discuss variance reduction and simulation bias. Readers seeking a practical calculation would need to consult the cited research and verify which techniques apply to their model discretization and option definition.

Key ideas

  • Vega measures an option value’s sensitivity to volatility, and the question concerns its simulation under Heston dynamics.
  • Asian options have path-dependent payoffs, which can affect how Greek estimation methods apply.
  • The response points to research on first- and second-order Greeks in the Heston model.
  • The exchange provides a reference rather than a worked method or implementation details.
  • Any cited approach should be checked for suitability to the Asian payoff and chosen simulation scheme.

Tags

OptionsVolatilityDerivatives pricing
Full text
# Simulation of the Vega in Heston model (for Asian Option)


# Simulation of the Vega in Heston model (for Asian Option)












I'm new here and I hope you guys can help me.

I want to calculate/simulate the Vega for my Asian option in the Heston model. The only source I found is the paper of Broadie/Kaya (2004) but they just mentioned the other greeks.

Do someone know other sources or a method how I can simulate the Vega precisly?

Thank you a lot!!!

## Answer by Mark Joshi (score 3)

https://quant.stackexchange.com/a/32626

Chan, Jiun Hong and Joshi, Mark S. and Zhu, Dan, First and Second Order Greeks in the Heston Model (December 26, 2010). Available at SSRN: https://ssrn.com/abstract=1718102 or http://dx.doi.org/10.2139/ssrn.1718102

should just about cover it.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.