Year: 2020
Author: Hongshan Li, Zhongyi Huang
East Asian Journal on Applied Mathematics, Vol. 10 (2020), Iss. 4 : pp. 746–773
Abstract
This paper deals with the valuation of European call options under the Heston stochastic volatility model. An asymptotic solution of the European pricing option problem in powers of the volatility of variance is derived. An artificial boundary method for solving the problem on a truncated domain is considered and artificial boundary conditions are constructed. Numerical simulations show that these conditions allow to find more accurate numerical solutions than for the widely-used Heston boundary condition.
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Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.4208/eajam.080320.270420
East Asian Journal on Applied Mathematics, Vol. 10 (2020), Iss. 4 : pp. 746–773
Published online: 2020-01
AMS Subject Headings:
Copyright: COPYRIGHT: © Global Science Press
Pages: 28
Keywords: Option pricing Heston model asymptotic analysis artificial boundary condition.