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Pricing barrier options in the heston model using the heath-platen estimator

 
: Coskun, S.; Korn, R.

:

Monte Carlo methods and applications 24 (2018), Nr.1, S.29-41
ISSN: 0929-9629
Englisch
Zeitschriftenaufsatz
Fraunhofer ITWM ()

Abstract
Both barrier options and the Heston stochastic volatility model are omnipresent in real-life applications of financial mathematics. In this paper, we apply the Heath–Platen (HP) estimator (as first introduced by Heath and Platen in [12]) to price barrier options in the Heston model setting as an alternative to conventional Monte Carlo methods and PDE based methods. We demonstrate the superior performance of the HP estimator via numerical examples and explain this performance by a detailed look at the underlying theoretical concept of the HP estimator.

: http://publica.fraunhofer.de/dokumente/N-524864.html