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

At the time of writing this article, Fourier inversion is the computational method of choice for a fast and accurate calculation of plain vanilla option prices in models with an analytically available characteristic function. Shifting the contour of integration along the complex plane allows for...

The characteristic functions of many affine jump-diffusion models, such as Heston’s stochastic volatility model and all of its extensions, involve multivalued functions such as the complex logarithm. If we restrict the logarithm to its principal branch, as is done in most software packages,...

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