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Discussion Series
Frankfurt MathFinance Colloquium
Dr. Susanne Griebsch
University of Technology, Sydney
A Stochastic Approach to the Valuation of Barrier Options in Heston's Stochastic Volatility Model
Abstract
In this study we derive (semi-)analytical solutions for the value of continuous barrier options in the presence of stochastic volatility. First we focus on the case where the underlying asset price evolves according to Heston's stochastic volatility model and restrict the interest rate spread as well as the correlation to be equal to zero. In the second part we show how approximation formulas for barrier options in the Heston model with an interest rate spread unequal to zero and specific correlation structures can be obtained. We compare our approach with other numerical pricing techniques.Thursday July 09 2009 6:30 p.m., Frankfurt School of Finance & Management. Room 21.
