2019
DOI: 10.1155/2019/4316272
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Geometric Asian Options Pricing under the Double Heston Stochastic Volatility Model with Stochastic Interest Rate

Abstract: This paper presents an extension of double Heston stochastic volatility model by incorporating stochastic interest rates and derives explicit solutions for the prices of the continuously monitored fixed and floating strike geometric Asian options. The discounted joint characteristic function of the log-asset price and its log-geometric mean value is computed by using the change of numeraire and the Fourier inversion transform technique. We also provide efficient approximated approach and analyze several effect… Show more

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Cited by 7 publications
(3 citation statements)
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“…Existing research on system state prediction recognizes the critical role played by the SSM. Many economic and financial time-series models can be represented in the form of SSM, such as the autoregressive integrated moving average (ARIMA) model [44], dynamic linear model (DLM) [4,5], and stochastic volatility model (SVM) [45]. is paper innovatively proposes a general algorithm framework for the time-series analysis of information propagation in social networks by using a DLM.…”
Section: State Space Modelmentioning
confidence: 99%
“…Existing research on system state prediction recognizes the critical role played by the SSM. Many economic and financial time-series models can be represented in the form of SSM, such as the autoregressive integrated moving average (ARIMA) model [44], dynamic linear model (DLM) [4,5], and stochastic volatility model (SVM) [45]. is paper innovatively proposes a general algorithm framework for the time-series analysis of information propagation in social networks by using a DLM.…”
Section: State Space Modelmentioning
confidence: 99%
“…Zhang and Feng [30] derived American option pricing formula under the two-factor Heston model by using the asymptotic expansion method, and the results show that two-factor Heston model is superior to the Heston model in pricing short-term American options. Zhong and Deng [31] explored geometric Asian option pricing under double Heston model and stochastic interest rate, the numerical results show that the long-term stochastic volatility and short-term stochastic volatility have signifcant efects on option pricing. Deng [32] explored European option under two-factor stochastic volatility model and the numerical results show that the model has more fexibility in capturing the term structure of implied volatility.…”
Section: Introductionmentioning
confidence: 99%
“…As demonstrated in [17], the main advantage of the MSV model is that it can calibrate short-term and long-term volatility levels better than a single-factor one. Recently, the MSV model has been applied to value exotic options (see Wong and Chan [21], Romo [22], and Zhong and Deng [23], for example).…”
Section: Introductionmentioning
confidence: 99%