| Autor: |
Kevin Z. Tong, Allen Liu |
| Jazyk: |
angličtina |
| Rok vydání: |
2023 |
| Předmět: |
|
| Zdroj: |
Journal of Management Science and Engineering, Vol 8, Iss 1, Pp 15-31 (2023) |
| Druh dokumentu: |
article |
| ISSN: |
2096-2320 |
| DOI: |
10.1016/j.jmse.2022.07.004 |
| Popis: |
In this paper, we propose a novel model for pricing double barrier options, where the asset price is modeled as a threshold geometric Brownian motion time changed by an integrated activity rate process, which is driven by the convolution of a fractional kernel with the CIR process. The new model both captures the leverage effect and produces rough paths for the volatility process. The model also nests the threshold diffusion, Heston and rough Heston models. We can derive analytical formulas for the double barrier option prices based on the eigenfunction expansion method. We also implement the model and numerically investigate the sensitivities of option prices with respect to the parameters of the model. |
| Databáze: |
Directory of Open Access Journals |
| Externí odkaz: |
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