LSM Algorithm for Pricing American Option Under Heston–Hull–White’s Stochastic Volatility Model

Abstract

In this paper, we present American option pricing under Heston---Hull---White's stochastic volatility and stochastic interest rate model. To do this, we first discretize the stochastic processes with Euler discretization scheme. Then, we price American option by using least-squares Monte Carlo algorithm. We also compare the numerical results of our model with the Heston-CIR model. Finally, numerical results show the efficiency of the proposed algorithm for pricing American option under the Heston---Hull---White model.