ON PRICING CONTINGENT CLAIMS UNDER THE DOUBLE HESTON MODEL
2012 ◽
Vol 15
(05)
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pp. 1250033
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Keyword(s):
This article presents a lattice based approach for pricing contingent claims when the underlying asset evolves according to the double Heston (dH) stochastic volatility model introduced by Christoffersen et al. (2009). We discretize the continuous evolution of both squared volatilities by a "binomial pyramid", and consider the asset value as an auxiliary state variable for which a subset of possible realizations is attached to each node of the pyramid. The elements of the subset cover the range of asset prices at each time slice, and claim price is computed solving backward through the "binomial pyramid". Numerical experiments confirm the accuracy and efficiency of the proposed model.
2019 ◽
Vol 22
(04)
◽
pp. 1950009
2014 ◽
Vol 17
(07)
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pp. 1450045
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2017 ◽
Vol 20
(08)
◽
pp. 1750055
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2015 ◽
Vol 2015
◽
pp. 1-20
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2008 ◽
Vol 40
(01)
◽
pp. 144-162
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2016 ◽
Vol 19
(05)
◽
pp. 1650031
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Keyword(s):
2005 ◽
Vol 2005
(3)
◽
pp. 307-322
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