A hybrid tree/finite-difference approach for Heston–Hull–White-type models

Maya Briani, Lucia Caramellino and Antonino Zanette

Journal of Computational Finance

Abstract: In this paper, we study a hybrid tree/finite-difference method, which allows us to obtain efficient and accurate European and American option prices in the Heston–Hull–White and Heston–Hull–White2d models. Moreover, as a by-product, we provide a new simulation scheme that can be used for Monte Carlo evaluations. Numerical results show the reliability and efficiency of the proposed methods.

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