A hybrid approach for the implementation of the Heston model
Copyright policy )A hybrid approach for the implementation of the Heston model
We propose a hybrid tree-finite difference method in order to approximate the Heston model. We prove the convergence by embedding the procedure in a bivariate Markov chain and we study the convergence of European and American option prices. We finally provide numerical experiments that give accurate option prices in the Heston model, showing the reliability and the efficiency of the algorithm.
- National Research Council Italy
- University of Udine Italy
- UNIVERSITE GUSTAVE EIFFEL France
- University of Rome Tor Vergata Italy
- Centre Inria de Paris France
Finite difference, European and American options, European and American options.; Finite differences; Heston model; Tree methods;, Tree method, finite differences, [QFIN.CP] Quantitative Finance [q-fin]/Computational Finance [q-fin.CP], tree methods, tree methods; finite differences; Heston model; European and American options., Settore MAT/06 - PROBABILITA' E STATISTICA MATEMATICA, Computational Finance (q-fin.CP), Heston model, FOS: Economics and business, Quantitative Finance - Computational Finance, European and American options.
Finite difference, European and American options, European and American options.; Finite differences; Heston model; Tree methods;, Tree method, finite differences, [QFIN.CP] Quantitative Finance [q-fin]/Computational Finance [q-fin.CP], tree methods, tree methods; finite differences; Heston model; European and American options., Settore MAT/06 - PROBABILITA' E STATISTICA MATEMATICA, Computational Finance (q-fin.CP), Heston model, FOS: Economics and business, Quantitative Finance - Computational Finance, European and American options.
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