Characteristic function pricing with the Heston-LIBOR hybrid model

Master Thesis

2019

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http://hdl.handle.net/11427/31273
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thesis_com_2019_sterley_christopher.pdf (1.06 MB)
Authors
Sterley, Christopher
Supervisors
Ouwehand, Peter
McWalter, Thomas
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African Institute of Financial Markets and Risk Management
Faculty
Faculty of Commerce
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Abstract
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.
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Mathematical Finance

Reference:

Sterley, C. 2019. Characteristic function pricing with the Heston-LIBOR hybrid model.

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