Research Article
Valuing Options in Heston's Stochastic Volatility Model: Another Analytical Approach
Table 2
European option prices in Heston's stochastic volatility model for different asset prices and correlations . Fixed parameters are , , , , , , , and .
| | Puts | Calls | | H | H(RCA) | MT | Diff | H | H(RCA) | MT | Diff |
| (80; ā1.00) | 18.4620 | 18.4620 | 18.4620 | | 0.1350 | 0.1350 | 0.1350 | | (100; ā1.00) | 5.0431 | 5.0431 | 5.0431 | | 6.5170 | 6.5170 | 6.5170 | | (120; ā1.00) | 1.0353 | 1.0353 | 1.0353 | | 22.3103 | 22.3103 | 22.3103 | |
| (80; ā0.75) | 18.5533 | 18.5533 | 18.5533 | | 0.2263 | 0.2263 | 0.2263 | | (100; ā0.75) | 5.0403 | 5.0403 | 5.0403 | | 6.5143 | 6.5143 | 6.5143 | | (120; ā0.75) | 0.9541 | 0.9541 | 0.9541 | | 22.2291 | 22.2291 | 22.2291 | |
| (80; ā0.50) | 18.6413 | 18.6413 | 18.6413 | | 0.3143 | 0.3143 | 0.3143 | | (100; ā0.50) | 5.0371 | 5.0371 | 5.0371 | | 6.5111 | 6.5111 | 6.5111 | | (120; ā0.50) | 0.8695 | 0.8695 | 0.8695 | | 22.1445 | 22.1445 | 22.1445 | |
| (80; ā0.25) | 18.7269 | 18.7269 | 18.7269 | | 0.3999 | 0.3999 | 0.3999 | | (100; ā0.25) | 5.0332 | 5.0332 | 5.0332 | | 6.5072 | 6.5072 | 6.5072 | | (120; ā0.25) | 0.7812 | 0.7812 | 0.7812 | | 22.0562 | 22.0562 | 22.0562 | |
| (80; 0.00) | 18.8104 | 18.8104 | 18.8104 | | 0.4834 | 0.4834 | 0.4834 | | (100; 0.00) | 5.0285 | 5.0285 | 5.0285 | | 6.5025 | 6.5025 | 6.5025 | | (120; 0.00) | 0.6887 | 0.6887 | 0.6887 | | 21.9637 | 21.9637 | 21.9637 | |
| (80; 0.25) | 18.8921 | 18.8921 | 18.8921 | | 0.5651 | 0.5651 | 0.5651 | | (100; 0.25) | 5.0229 | 5.0229 | 5.0229 | | 6.4969 | 6.4969 | 6.4969 | | (120; 0.25) | 0.5913 | 0.5913 | 0.5913 | | 21.8663 | 21.8663 | 21.8663 | |
| (80; 0.50) | 18.9721 | 18.9721 | 18.9721 | | 0.6451 | 0.6451 | 0.6450 | | (100; 0.50) | 5.0166 | 5.0166 | 5.0166 | | 6.4906 | 6.4906 | 6.4906 | | (120; 0.50) | 0.4882 | 0.4881 | 0.4881 | | 21.7931 | 21.7630 | 21.7630 | |
| (80; 1.00) | 19.1275 | 19.1275 | 19.1275 | | 0.8005 | 0.8005 | 0.8005 | | (100; 1.00) | 5.0027 | 5.0027 | 5.0027 | | 6.4767 | 6.4767 | 6.4767 | | (120; 1.00) | 0.2566 | 0.2566 | 0.2566 | | 21.5316 | 21.5316 | 21.5316 | |
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