A hybrid tree-finite difference approach for the Heston model
AbstractWe 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.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1307.7178.
Date of creation: Jul 2013
Date of revision: Oct 2013
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-05 (All new papers)
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