Both barrier options and the Heston stochastic volatility model are omnipresent in real-life applications of financial mathematics. In this paper, we apply the Heath–Platen (HP) estimator (as first introduced by Heath and Platen in [12]) to price barrier options in the Heston model setting as an alternative to conventional Monte Carlo methods and PDE based methods. We demonstrate the ...
When you get the parameter estimation, you can plug the parameter values into the Heston Monte Carlo options pricing model and get the price estimation with stochastic volatility. But as we already discussed for Heston model, the introduction of randomness of volatility increases the complexity of the estimation.