Foreign Exchange Options on Heston-CIR Model Under Levy Process Framework

被引：7
|
作者：
Ascione, Giacomo [1 ]
Mehrdoust, Farshid [2 ]
Orlando, Giuseppe [3 ,4 ,5 ]
Samimi, Oldouz [2 ]
机构：
[1] Scuola Super Meridionale, Largo S Marcellino 10, I-80138 Naples, Italy
[2] Univ Guilan, Fac Math Sci, Dept Appl Math, POB 41938-1914, Rasht, Iran
[3] Univ Bari Aldo Moro, Dept Econ & Finance, Largo Abbazia S Scolast, I-70124 Bari, Italy
[4] HSE Univ, Dept Econ, 16 Soyuza Pechatnikov St, St Petersburg 190121, Russia
[5] Univ Jaen, Dept Math, Campus Lagunillas S-N, Jaen 23071, Spain
来源：
APPLIED MATHEMATICS AND COMPUTATION | 2023年 / 446卷
关键词：
Heston-CIR model; Variance gamma process; L?vy processes; Foreign short interest rates; MILSTEIN-TYPE SCHEME; STOCHASTIC VOLATILITY; AMERICAN OPTIONS; DIFFERENTIAL-EQUATIONS; DISTRIBUTIONS; DRIVEN; PRICE;
D O I：
10.1016/j.amc.2023.127851
中图分类号：
O29 [应用数学];
学科分类号：
070104 ;
摘要：
In this paper, we consider the Heston-CIR model with Levy process for pricing in the for-eign exchange (FX) market by providing a new formula that better fits the distribution of prices. To do that, first, we study the existence and uniqueness of the solution to this model. Second, we examine the strong convergence of the Levy process with stochastic domestic short interest rates, foreign short interest rates and stochastic volatility. Then, we apply Least Squares Monte Carlo (LSMC) method for pricing American options under our model with stochastic volatility and stochastic interest rate. Finally, by considering real-world market data, we illustrate numerical results for the four-factor Heston-CIR Levy model.(c) 2023 Elsevier Inc. All rights reserved.
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页数：31
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