Martedi` 6 Giugno ore 10:30 aula riunioni del primo piano via dei Taurini 19, Roma
Giulia Terenzi (Universita` di Roma Tor Vergata)
A hybrid tree-finite difference approach for Heston-type models
We present an algorithm for the pricing of European and American options in the Heston model and in other stochastic volatility models which generalize it. Our procedure is based on a backward induction that works following a finite difference PDE method in the direction of the share process and a tree approximation in the direction of the volatility. Numerical results show that the algorithm turns out to be reliable and efficient. We study the stability of the algorithm by means of a Von Neumann analysis, but only limited convergence results have been proved.
================================== Lucia Caramellino Dipartimento di Matematica Universita` di Roma "Tor Vergata" Via della Ricerca Scientifica I-00133, Roma, Italy www.mat.uniroma2.it/~caramell