Author : Christian Bayer
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (14 download)
Book Synopsis Efficient Option Pricing in the Rough Heston Model Using Weak Simulation Schemes by : Christian Bayer
Download or read book Efficient Option Pricing in the Rough Heston Model Using Weak Simulation Schemes written by Christian Bayer and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide an efficient and accurate simulation scheme for the rough Heston model in the standard (H > 0) as well as the hyper-rough regime (H > -1/2). The scheme is based on low-dimensional Markovian approximations of the rough Heston process derived in [Bayer and Breneis, arXiv:2309.07023], and provides weak approximation to the rough Heston process. Numerical experiments show that the new scheme exhibits second order weak convergence, while the computational cost increases linear with respect to the number of time steps. In comparison, existing schemes based on discretization of the underlying stochastic Volterra integrals such as Gatheral's HQE scheme show a quadratic dependence of the computational cost. Extensive numerical tests for standard and path-dependent European options and Bermudan options show the method's accuracy and efficiency.