Pages: 31-40

Abstract

In the present study, an effective numerical method is offered based on the Fourier series for pricing the Bermudan transaction option and discrete observation option under Heston stochastic volatility model. In fact, it is through introducing Heston Model and by the assistance of Fourier series that the 2D pricing formulas of Bermudan transaction option and barrier discrete options are presented. To do so, numerical integration regulations are used and the error convergence is investigated through performing numerical tests.