The valuation of barrier options under a threshold rough Heston model

作     者：Kevin Z.Tong Allen Liu 

作者机构：Department of Mathematics and StatisticsUniversity of Ottawa585 King EdwardOttawaOntarioK1N 6N5Canada Enterprise Risk and Portfolio ManagementBank of MontrealFirst Canadian PlaceTorontoOntarioM5X 1A3Canada 

出 版 物：《Journal of Management Science and Engineering》 (管理科学学报（英文版）)

年 卷 期：2023年第8卷第1期

页      面：15-31页

核心收录：

学科分类：02[经济学] 0202[经济学-应用经济学] 020202[经济学-区域经济学] 

主　　题：Rough stochastic volatility Threshold diffusion Barrier options Eigenfunction expansion Stochastic time change 

摘      要：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 *** new model both captures the leverage effect and produces rough paths for the volatility *** model also nests the threshold diffusion,Heston and rough Heston *** can derive analytical formulas for the double barrier option prices based on the eigenfunction expansion *** also implement the model and numerically investigate the sensitivities of option prices with respect to the parameters of the model.