Finite difference approximation of hedging quantities in the Heston model

Abstract

This note concerns the hedging quantities Delta and Gamma in the Heston model for European-style financial options. A modification of the discretization technique from In 't Hout & Foulon ( 2010) is proposed, which enables a fast and accurate approximation of these important quantities. Numerical experiments are given that illustrate the performance.

Computational technique for simulating variable-order fractional Heston model with application in US stock market

“…To overcome this limitation, in 1993, Heston suggested Heston's stochastic volatility (HSV) model [6]. The HSV model has been extended in finance for modeling the dynamics of implied volatilities and providing their user with simple breakeven accounting conditions for the profit and loss (S&P) of a hedged position [2,[7][8][9][10][11][12][13][14][15][16][17]].…”