On the Heston Model with Stochastic Interest Rates
On the Heston Model with Stochastic Interest Rates
We discuss the Heston model [Rev. Financ. Stud., 6 (1993), pp. 327–343] with stochastic interest rates driven by Hull–White (HW) [J. Derivatives, 4 (1996), pp. 26–36] or Cox–Ingersoll–Ross (CIR) [Econometrica, 53 (1985), pp. 385–407] processes. Two projection techniques to derive affine approximations of the original hybrid models are presented. In …