A second-order weak approximation of Heston model by discrete random variables

DOI10.1007/S10986-015-9298-4MaRDI QIDQ904337zbMATH OpenOpenAlexFDO

Authors Antanas Lenkšas, Vigirdas Mackevičius

Publication date 13 January 2016

Published in Lithuanian Mathematical Journal (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s10986-015-9298-4

zbMATH Keywords

simulationoption pricingmoment matchingHeston modelweak approximationssplit-step approximationspotential approximations

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Numerical solutions to stochastic differential and integral equations (65C30) Financial applications of other theories (91G80)

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Cites work

• A closed-form solution for options with stochastic volatility with applications to bond and currency options
• A comparison of biased simulation schemes for stochastic volatility models
• Convergence of numerical methods for stochastic differential equations in mathematical finance
• High order discretization schemes for the CIR process: application to affine term structure and heston models
• Moment explosions in stochastic volatility models
• On the discretization schemes for the CIR (and Bessel squared) processes
• On weak approximations of \((a, b)\)-invariant diffusions
• Statistical tools for finance and insurance.
• Weak approximation of CIR equation by discrete random variables
• Weak approximation of Heston model by discrete random variables

Cited in

(4)

• VALUE-AT-RISK COMPUTATIONS IN STOCHASTIC VOLATILITY MODELS USING SECOND-ORDER WEAK APPROXIMATION SCHEMES
• Weak approximation of CKLS and CEV processes by discrete random variables
• Computational technique for simulating variable-order fractional Heston model with application in US stock market
• Higher-order weak schemes for the Heston stochastic volatility model by extrapolation

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