A Shannon Wavelet Method for Pricing American Options under Two-Factor Stochastic Volatilities and Stochastic Interest Rate
Joint Authors
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2020, Issue 2020 (31 Dec. 2020), pp.1-8, 8 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2020-04-09
Country of Publication
Egypt
No. of Pages
8
Main Subjects
Abstract EN
In the paper, the pricing of the American put options under the double Heston model with Cox–Ingersoll–Ross (CIR) interest rate process is studied.
The characteristic function of the log asset price is derived, and thereby Bermuda options are well evaluated by means of a state-of-the-art Shannon wavelet inverse Fourier technique (SWIFT), which is a robust and highly efficient pricing method.
Based on the SWIFT method, the price of American option can be approximated by using Richardson extrapolation schemes on a series of Bermudan options.
Numerical experiments show that the proposed pricing method is efficient, especially for short-term American put options.
American Psychological Association (APA)
Shoude, Huang& Guo, Xunxiang. 2020. A Shannon Wavelet Method for Pricing American Options under Two-Factor Stochastic Volatilities and Stochastic Interest Rate. Discrete Dynamics in Nature and Society،Vol. 2020, no. 2020, pp.1-8.
https://search.emarefa.net/detail/BIM-1153503
Modern Language Association (MLA)
Shoude, Huang& Guo, Xunxiang. A Shannon Wavelet Method for Pricing American Options under Two-Factor Stochastic Volatilities and Stochastic Interest Rate. Discrete Dynamics in Nature and Society No. 2020 (2020), pp.1-8.
https://search.emarefa.net/detail/BIM-1153503
American Medical Association (AMA)
Shoude, Huang& Guo, Xunxiang. A Shannon Wavelet Method for Pricing American Options under Two-Factor Stochastic Volatilities and Stochastic Interest Rate. Discrete Dynamics in Nature and Society. 2020. Vol. 2020, no. 2020, pp.1-8.
https://search.emarefa.net/detail/BIM-1153503
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1153503