Related papers: An Analysis of the Heston Stochastic Volatility Mo…
In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…
We give an analytical characterization of the price function of an American option in Heston-type models. Our approach is based on variational inequalities and extends recent results of Daskalopoulos and Feehan (2011). We study the…
We consider assets for which price $X_t$ and squared volatility $Y_t$ are jointly driven by Heston joint stochastic differential equations (SDEs). When the parameters of these SDEs are estimated from $N$ sub-sampled data $(X_{nT}, Y_{nT})$,…
Stochastic volatility models have existed in Option pricing theory ever since the crash of 1987 which violated the Black-Scholes model assumption of constant volatility. Heston model is one such stochastic volatility model that is widely…
Deep learning is a powerful tool whose applications in quantitative finance are growing every day. Yet, artificial neural networks behave as black boxes and this hinders validation and accountability processes. Being able to interpret the…
We introduce a novel multi-factor Heston-based stochastic volatility model, which is able to reproduce consistently typical multi-dimensional FX vanilla markets, while retaining the (semi)-analytical tractability typical of affine models…
We study some properties of the American option price in the stochastic volatility Heston model. We first prove that, if the payoff function is convex and satisfies some regularity assumptions, then the option value function is increasing…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…
In the first part of this thesis, we focus on American options in the Heston model. We first give an analytical characterization of the value function of an American option as the unique solution of the associated (degenerate) parabolic…
In this paper an improved Cuckoo Search Algorithm is developed to allow for an efficient and robust calibration of the Heston option pricing model for American options. Calibration of stochastic volatility models like the Heston is…
A new approximate Bayesian inferential framework is proposed that exploits multiple information sources -- daily spot returns, high-frequency spot data and option prices -- and enables fast calculation of probabilistic predictions of future…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
We propose to take advantage of the common knowledge of the characteristic function of the swap rate process as modelled in the LIBOR Market Model with Stochastic Volatility and Displaced Diffusion (DDSVLMM) to derive analytical expressions…
We consider the problem of option pricing under stochastic volatility models, focusing on the linear approximation of the two processes known as exponential Ornstein-Uhlenbeck and Stein-Stein. Indeed, we show they admit the same limit…
In this paper, we consider option pricing in a framework of the fractional Heston-type model with $H>1/2$. As it is impossible to obtain an explicit formula for the expectation $\mathbb E f(S_T)$ in this case, where $S_T$ is the asset price…
We 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.…
In American options, the early exercise feature allows the option to be exercised at any time prior to expiration. However, this flexibility introduces a challenge: the pricing model must value the option while simultaneously determining an…
American put options are among the most frequently traded single stock options, and their calibration is computationally challenging since no closed-form expression is available. Due to the higher flexibility in comparison to European…
We develop quantum algorithms for pricing Asian and barrier options under the Heston model, a popular stochastic volatility model, and estimate their costs, in terms of T-count, T-depth and number of logical qubits, on instances under…
The lifted Heston model is a stochastic volatility model emerging as a Markovian lift of the rough Heston model and the class of rough volatility processes. The model encodes the path dependency of volatility on a set of N square-root state…