Abstract: Stochastic volatility is an interesting area in financial mathematics. Parabolic partial differential equations with mixed differentiation terms are the focus of numerical solution of Heston model. This document covers the numerical methods to Heston model. Chapter 1 is an introduction to the problem and my main interest. Chapter 2 is an overview of Heston model and its closed‐form solution. The closed‐form solution is a benchmark to test the numerical methods Chapter 3 talks about the explicit scheme which is a straightforward method in solving Heston model. The result and restriction of this model are illustrated. Chapter 4 discusses the ADI method dealing with special equations like Heston PDE. The details of this method are covered and comparison between schemes is given.
Publication Year: 2008
Publication Date: 2008-07-01
Language: en
Type: dissertation
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Cited By Count: 5
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