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arXiv · 2301.12072

Unbiased estimators for the Heston model with stochastic interest rates

Chao Zheng·Jiangtao Pan
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Abstract

We combine the unbiased estimators in Rhee and Glynn (Operations Research: 63(5), 1026-1043, 2015) and the Heston model with stochastic interest rates. Specifically, we first develop a semi-exact log-Euler scheme for the Heston model with stochastic interest rates. Then, under mild assumptions, we show that the convergence rate in the $L^2$ norm is $O(h)$, where $h$ is the step size. The result applies to a large class of models, such as the Heston-Hull-While model, the Heston-CIR model and the Heston-Black-Karasinski model. Numerical experiments support our theoretical convergence rate.

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Chao Zheng, Jiangtao Pan. 2023-01-28. Unbiased estimators for the Heston model with stochastic interest rates. https://arxiv.org/abs/2301.12072

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