November 9, 2025Open Access

Rough Heston model as the scaling limit of bivariate cumulative heavy-tailed INAR processes: Weak-error bounds and option pricing

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Computational analysis shows scaling limit and leverage effect in barrier options, revealing potential improvements.

Linking rough Heston model to bivariate cumulative INAR processes illuminates complex volatility dynamics.
Barriers options demonstrate improved efficiency with weak-error bounds through advanced computational methods with simulations.
Analysis employs Monte Carlo engine enhancing option pricing accuracy while considering finite-horizon weak-error performance.
Results suggest a robust framework for understanding the leverage effect, enhancing option pricing models more broadly.

Wang et al. (2025) studied this question.

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