Expansion method for pricing foreign exchange options under stochastic volatility and interest rates

نویسندگان

چکیده

Some expansion methods have been proposed for pricing options approximately in analytical form. One of these is the smart method based on Malliavin calculus, which used to price Heston stochastic volatility model with deterministic interest rates. In this paper, we apply Heston–Hull–White model, admits rates enhance and obtain formula up second order. Then numerical studies are performed compare our approximation Monte Carlo simulation. Our shows numerically comparable results another using characteristic function, can also be applied parameter configurations where latter not useful. The control variate improve accuracy high volatility-of-volatility cases.

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ژورنال

عنوان ژورنال: Journal of Computational Finance

سال: 2021

ISSN: ['1460-1559', '1755-2850']

DOI: https://doi.org/10.21314/jcf.2021.005