A second-order discretization scheme for the CIR process: application to the Heston model
Résumé
This paper presents a weak second-order scheme for the Cox-Ingersoll-Ross process, without any restriction on its parameters. At the same time, it presents a general recursive construction method to get weak second-order schemes, extending the ideas of Ninomiya and Victoir. Combining these both results, this allows to propose a rather accurate scheme for the Heston model. Simulation results are given to illustrate this.
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