CARR, PETER; SCHOUTENS, WIM - In: International Journal of Theoretical and Applied … 11 (2008) 04, pp. 403-414
In this paper, we will explain how to perfectly hedge under Heston's stochastic volatility model with jump-to-default, which is in itself a generalization of the Merton jump-to-default model and a special case of the Heston model with jumps. The hedging instruments we use to build the hedge will...