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In this poster, we consider a recently introduced hybrid tree pricing model. We consider the case where there are two stochastic processes and we consider the Heston-Hull-White model, and a generalized Hull-White stochastic interest rate model. We build two trees (X, V) and then take the cross product to construct the mesh of the tree. We then predict prices analogous to the binomial asset pricing model. To validate the model we compare the results to a simulation using the Monte Carlo method. We shall consider the case where there is zero correlation between the two stochastic processes and the case where there is nonzero correlation between the two stochastic processes.
Paul W Eloe
Primary Advisor's Department
Stander Symposium poster
"A hybrid tree method using Heston-Hull-White type models." (2019). Stander Symposium Posters. 1708.