Geometric Asian Options Pricing under the Double Heston Stochastic Volatility Model with Stochastic Interest Rate

Yanhong Zhong and Guohe Deng

Complexity, 2019, vol. 2019, 1-13

Abstract:

This paper presents an extension of double Heston stochastic volatility model by incorporating stochastic interest rates and derives explicit solutions for the prices of the continuously monitored fixed and floating strike geometric Asian options. The discounted joint characteristic function of the log-asset price and its log-geometric mean value is computed by using the change of numeraire and the Fourier inversion transform technique. We also provide efficient approximated approach and analyze several effects on option prices under the proposed model. Numerical examples show that both stochastic volatility and stochastic interest rate have a significant impact on option values, particularly on the values of longer term options. The proposed model is suitable for modeling the longer time real-market changes and managing the credit risks.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://downloads.hindawi.com/journals/8503/2019/4316272.pdf (application/pdf)
http://downloads.hindawi.com/journals/8503/2019/4316272.xml (text/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hin:complx:4316272

DOI: 10.1155/2019/4316272

Access Statistics for this article

More articles in Complexity from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().