American Options under Stochastic Volatility: Parameter Estimation and Pricing Efficiency
نویسندگان
چکیده
We consider American option pricing in the context of the widely adopted stochastic volatility model of Heston (1993). While estimating such model is challenging, we develop a pricing technique that is both efficiently accurate and robust with respect to estimates of spot and equilibrium volatilities. Our approach is based on a well-developed and efficient procedure for the constant volatility model of Black and Scholes. Through an out–of–sample validation based on S&P 100 data, we also show that our method generates prices close to market values. (JEL G13)
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تاریخ انتشار 2015