Forward starting options pricing with double stochastic volatility, stochastic interest rates and double jumps

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS

卷:325

Article

Zhang, Sumei¹  Sun, Yudong² 

[1] Xian Univ Posts & Telecommun, Sch Sci, Xian 710121, Peoples R China

[2] Guizhou Minzu Univ, Sch Sci, Guiyang 550025, Guizhou, Peoples R China

关键词: Forward starting options;    COS method;    Double exponential jumps;    Stochastic interest rates;    Double Heston model;   

DOI  :  10.1016/j.cam.2017.04.013

来源: Elsevier

【 摘 要 】

We present an extension of double Heston stochastic volatility model by introducing CIR stochastic interest rate and double exponential jumps in the stock price process. We derive the characteristic function and forward characteristic function of the log asset price and thereby forward starting options are well evaluated by the COS method. We also provide efficient simulation of the proposed model and Monte Carlo solutions to forward starting options pricing based on the QE scheme. Numerical results show that the COS method is fast and efficient for pricing forward starting options. (C) 2017 Elsevier B.V. All rights reserved.

【 授权许可】

Free