Heston model characteristic function does not handle limit case xi=0

finmath / finmath-lib

Mathematical Finance Library: Algorithms and methodologies related to mathematical finance.

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Heston model characteristic function does not handle limit case xi=0 #42

Open cfries opened 7 years ago

cfries commented 7 years ago

The Heston model characteristic function in net.finmath.fouriermethod.models does not Handle the limit case xi=0. The implementation results in NAN due to a 0 / 0. This should be fixed. The case xi=0.0001 (or smaller) works and converges to the Black-Scholes value.