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2013•Proceedings of the ISCIE International Symposium on Stochastic Systems Theory and its ApplicationsOpen access

A Weak Taylor Scheme with Simulating Stochastic Areas and Heston Approximation of Stochastic Volatility Models

Hiroyuki Fukunaga, Kotaro Imamura, Kensuke Kado, Nobutaka Shimizu, Kazuhiro Yoshikawa

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Abstract

This paper presents two approximation schemes for SDEs. The one is a second order scheme simulating stochastic areas, and the other is Heston approximation of stochastic volatility models. For the latter, we give some numerical results.

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What this paper is about

This paper presents two approximation schemes for SDEs. The one is a second order scheme simulating stochastic areas, and the other is Heston approximation of stochastic volatility models. For the latter, we give some numerical results.

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Available abstract

This paper presents two approximation schemes for SDEs. The one is a second order scheme simulating stochastic areas, and the other is Heston approximation of stochastic volatility models. For the latter, we give some numerical results.

Key concepts: Stochastic volatility, Heston model, Applied mathematics, Volatility (finance), SABR volatility model, Scheme (mathematics), Mathematics, Implied volatility

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