We focus on closed-form option pricing in Heston's stochastic volatility model, where closed-form formulas exist only for a few option types. Most of these closed-form solutions are constructed from characteristic functions. We follow this closed-form approach and derive multivariate...

Options with discontinuous payoffs are generally traded above their theoretical Black-Scholes prices because of the hedging difficulties created by their large delta and gamma values. A theoretical method for pricing these options is to constrain the hedging portfolio and incorporate this...