Search Results

We propose novel Bitcoin-denominated derivatives contracts on carbon bonds. We consider a futures contract on carbon bonds where its price is expressed in terms of bitcoins. Then, we put forward options on a futures contract of the former type. ...

We combine the multilevel Monte Carlo (MLMC) method with a numerical scheme for the Heston model that simulates the variance process exactly or almost exactly and applies the stochastic trapezoidal rule to approximate the time-integrated variance ...

The Cox–Ingersoll–Ross (CIR) process has important applications in finance. However, it is challenging to develop a multilevel Monte Carlo (MLMC) method with an approximate CIR process such that the relevant MLMC variance has a constant ...

Hedging at-the-money digital options near maturity, remains a challenge in quantitative finance. In the present work, we carry out a hedging strategy by means of a bull spread. We study the probability of super- and sub-hedge the digital option ...

Asset dynamics with rough volatility recently received a great deal of attention in finance because they are consistent with empirical observations. This article provides a detailed analysis of the impact of roughness on prices of ...

In this paper, we investigate the pricing problem of barrier options under the Heston model. We innovatively develop a two-step solution process and present an analytical approximation formula of high efficiency and accuracy. In specific, upon ...

The pricing of financial derivatives is one of the most important issues in financial markets. Due to the huge computational complexity, highly dependence of model and parameter of the traditional pricing model based on Monte Carlo simulation, it has ...

This paper considers a robust optimal portfolio problem under Heston model in which the risky asset price is related to the historical performance. The finance market includes a riskless asset and a risky asset whose price is controlled by a ...

This paper examines a continuous time intertemporal consumption and portfolio choice problem with a stochastic differential utility preference of Epstein–Zin type for a robust investor, who worries about model misspecification and ...

The Heston model is the most renowned stochastic volatility function in finance, but the calibration input parameters is a challenging task. This contest grows up because the instantaneous volatility is unobservable or market quotes are absent/...

As market observations say that many financial quantities are correlated in a time dependent, nonlinear or unpredictable way, in this study, we present an approach to price discretely sampled variance swaps based on the Heston model extended by ...

Association or interdependence of two stock prices is analyzed, and selection criteria for a suitable model developed in the present paper. The association is generated by stochastic correlation, given by a stochastic differential equation (SDE), ...

This paper studies the valuation of the American call-option under the Heston model in two regimes, i.e., fast-mean reverting and slow-mean reverting regimes. In the case of the European-style option under the Heston model, a closed-form solution ...

We extend Merton’s framework by adopting stochastic volatility to propose an early warning indicator for banks’ credit risk. Bayesian inference is employed to estimate the parameters of Heston model. We provide empirical evidence and demonstrate ...

We prove the existence of an optimal feedback controller for a stochastic optimization problem constituted by a variation of the Heston model, where a stochastic input process is added in order to minimize a given performance criterion. The ...

We consider a fractional version of the Heston volatility model which is inspired by [H. Guennoun et al., SIAM J. Financial Math,, 9 (2018), pp. 1017--1045]. Within this model we treat portfolio optimization problems for power utility functions. Using a ...

We present a new tree-based numerical approach for options pricing under Heston’s stochastic volatility model. The tree approach is simple to implement, computationally cheap and has a very clear financial interpretation. In addition, ...

We consider an incomplete market with a nontradable stochastic factor and a continuous-time investment problem with an optimality criterion based on monotone mean-variance preferences. We formulate it as a stochastic differential game problem and use ...

The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with ...

In this paper, we present a new splitting scheme for pricing the American options under the Heston model. For this purpose, first the price of American put option is modeled, which its underlying asset value follows Heston's stochastic volatility model ,...