Asymptotic expansion method for pricing and hedging American options with two-factor stochastic volatilities and stochastic interest rate

Zhang, Jianke

doi:10.1080/00207160.2019.1579316

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2020

2024

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Cited by 3 publications

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“…In this section, some numerical examples are performed to test the performance of the SWIFT method for pricing American puts against its alternative competitor, the LSM Monte Carlo method [21], as a benchmark. In particular, we make use of the same constant parameters as specified by Zhang and Zhang [22]. ese parameter values are listed in Table 1 for all our numerical examples.…”

Section: Numerical Examplesmentioning

confidence: 99%

A Shannon Wavelet Method for Pricing American Options under Two-Factor Stochastic Volatilities and Stochastic Interest Rate

Huang

Guo

2020

Discrete Dynamics in Nature and Society

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In the paper, the pricing of the American put options under the double Heston model with Cox–Ingersoll–Ross (CIR) interest rate process is studied. The characteristic function of the log asset price is derived, and thereby Bermuda options are well evaluated by means of a state-of-the-art Shannon wavelet inverse Fourier technique (SWIFT), which is a robust and highly efficient pricing method. Based on the SWIFT method, the price of American option can be approximated by using Richardson extrapolation schemes on a series of Bermudan options. Numerical experiments show that the proposed pricing method is efficient, especially for short-term American put options.

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Section: Numerical Examplesmentioning

confidence: 99%