Open AccessPricing European Options in the Heston and the Double Heston models
Author(s) -
Arkadiusz Orzechowski
Publication year - 2022
Publication title -
metody ilościowe w badaniach ekonomicznych/quantitative methods in economics
Language(s) - English
Resource type - Journals
eISSN - 2543-8565
pISSN - 2082-792X
DOI - 10.22630/mibe.2021.22.1.4
Subject(s) - heston model , stochastic volatility , valuation of options , mathematics , gauss , econometrics , class (philosophy) , inverse , volatility (finance) , economics , computer science , sabr volatility model , physics , geometry , quantum mechanics , artificial intelligence
Two models of pricing European options are presented and compared in this paper, i.e. the Heston model and the double Heston model. As the models belong to the class of stochastic volatility models, particular attention is paid to the way the characteristic functions and their inverse Fourier transforms are determined. The aim of the study is to investigate computational efficiency of pricing European calls. The method applied is based on the assumption that the prices of the derivatives are evaluated by means of Gauss-Kronrod quadrature.