The weak convergence order of two Euler-type discretization schemes for the log-Heston model

06/21/2021

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by   Annalena Mickel, et al.

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We study the weak convergence order of two Euler-type discretizations of the log-Heston Model where we use symmetrization and absorption, respectively, to prevent the discretization of the underlying CIR process from becoming negative. If the Feller index ν of the CIR process satisfies ν>1, we establish weak convergence order one, while for ν≤ 1, we obtain weak convergence order ν-ϵ for ϵ>0 arbitrarily small. We illustrate our theoretical findings by several numerical examples.