Pricing multi-asset American option under Heston-CIR diffusion model with jumps

Abstract

In this paper, we study Heston-CIR model with the double exponential jumps. We first verify the existence and uniqueness of the solution related to the price process of the model. Next, we calibrate the option prices resulting from this model to a set of observed index options. At last, by applying the Least Square Monte-Carlo algorithm (LSM), we numerically examine the multi-asset American style put options under our considered model.

Keywords:

• Heston-CIR model
• Jump-diffusion model
• American put option
• Double exponential jumps

MATHEMATICS SUBJECT CLASSIFICATION:

• 60G22
• 97M30