Hyperbolic Symmetrization of Heston Type Diffusion

Yuuki Ida () and Tsuyoshi Kinoshita ()
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Yuuki Ida: Ritsumeikan University
Tsuyoshi Kinoshita: Ritsumeikan University

Asia-Pacific Financial Markets, 2019, vol. 26, issue 3, No 4, 355-364

Abstract: Abstract The symmetrization of diffusion processes was originally introduced by Imamura, Ishigaki and Okumura, and was applied to pricing of barrier options. The authors of the present paper previously introduced in Ida et al. (Pac J Math Ind 10:1, 2018) a hyperbolic version of the symmetrization of a diffusion by symmetrizing drift coefficient in view of applications under a SABR model which is transformed to a hyperbolic Brownian motion with drift. In the present paper, in order to apply the hyperbolic symmetrization technique to Heston model, we introduce an extension where diffusion coefficient is also symmetrized. Some numerical results are also presented.

Keywords: Heston model; Symmetrization; Euler–Maruyama scheme; Hyperbolic space; Numerical simulation (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10690-019-09269-1

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