This paper establishes the precise second order convergence rates of the continuous-time Markov chain (CTMC) approximation method for pricing options and calculating its Greeks under the general framework of stochastic local volatility models, which include the Heston and SABR models as special...

The hypothesis that asset returns are log-normally distributed has been widely rejected. The extant literature has shown that empirical asset returns are highly skewed and leptokurtic (fat tails). The Affine Jump-Diffusion (AJD) model improves upon the log-normal specification by adding a jump...