American options in the Volterra Heston model
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Publication:5080128
Abstract: We price American options using kernel-based approximations of the Volterra Heston model. We choose these approximations because they allow simulation-based techniques for pricing. We prove the convergence of American option prices in the approximating sequence of models towards the prices in the Volterra Heston model. A crucial step in the proof is to exploit the affine structure of the model in order to establish explicit formulas and convergence results for the conditional Fourier-Laplace transform of the log price and an adjusted version of the forward variance. We illustrate with numerical examples our convergence result and the behavior of American option prices with respect to certain parameters of the model.
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Cites work
- scientific article; zbMATH DE number 1245556 (Why is no real title available?)
- scientific article; zbMATH DE number 194918 (Why is no real title available?)
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Cited in
(7)- The inverse volatility problem for American options
- Variational Formulation of American Option Prices in the Heston Model
- American options exercise boundary when the volatility changes randomly
- American options: the EPV pricing model
- The rough Hawkes Heston stochastic volatility model
- SHOULD AN AMERICAN OPTION BE EXERCISED EARLIER OR LATER IF VOLATILITY IS NOT ASSUMED TO BE A CONSTANT?
- ROUGH-HESTON LOCAL-VOLATILITY MODEL
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