We derive an approximate characteristic function for a simplified version of the Heston-LIBOR model, which assumes a constant instantaneous volatility structure in the underlying LIBOR market model. We also implement measures to improve the numerical stability of the characteristic function derived in this dissertation as well as the one derived by Grzelak and Oosterlee. The ultimate aim of the dissertation is to prevent these characteristic functions from exploding for given parameter values.
Reference:
Sterley, C. 2019. Characteristic function pricing with the Heston-LIBOR hybrid model.
Sterley, C. (2019). Characteristic function pricing with the Heston-LIBOR hybrid model. (). ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management. Retrieved from http://hdl.handle.net/11427/31273
Sterley, Christopher. "Characteristic function pricing with the Heston-LIBOR hybrid model." ., ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2019. http://hdl.handle.net/11427/31273
Sterley C. Characteristic function pricing with the Heston-LIBOR hybrid model. []. ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2019 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/31273
