Geometric Asian Options Pricing under the Double Heston Stochastic Volatility Model with Stochastic Interest Rate
Joint Authors
Source
Issue
Vol. 2019, Issue 2019 (31 Dec. 2019), pp.1-13, 13 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2019-01-10
Country of Publication
Egypt
No. of Pages
13
Main Subjects
Abstract EN
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 effects on option prices under the proposed model.
Numerical examples show that both stochastic volatility and stochastic interest rate have a significant impact on option values, particularly on the values of longer term options.
The proposed model is suitable for modeling the longer time real-market changes and managing the credit risks.
American Psychological Association (APA)
Zhong, Yanhong& Deng, Guohe. 2019. Geometric Asian Options Pricing under the Double Heston Stochastic Volatility Model with Stochastic Interest Rate. Complexity،Vol. 2019, no. 2019, pp.1-13.
https://search.emarefa.net/detail/BIM-1131775
Modern Language Association (MLA)
Zhong, Yanhong& Deng, Guohe. Geometric Asian Options Pricing under the Double Heston Stochastic Volatility Model with Stochastic Interest Rate. Complexity No. 2019 (2019), pp.1-13.
https://search.emarefa.net/detail/BIM-1131775
American Medical Association (AMA)
Zhong, Yanhong& Deng, Guohe. Geometric Asian Options Pricing under the Double Heston Stochastic Volatility Model with Stochastic Interest Rate. Complexity. 2019. Vol. 2019, no. 2019, pp.1-13.
https://search.emarefa.net/detail/BIM-1131775
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1131775