DSINC Method Overcomes Heston Model Limitations: Applications to 3/2 and Other Non-Affine Stochastic Volatility Models

This study extends the DSINC method, originally used for American option pricing, from affine Heston-type models to general single-factor stochastic volatility models, verifying the effectiveness of the collapse identity under non-affine models. The 3/2 model can derive closed-form joint transforms based on Kummer functions, the correlation-free SABR model can adopt Bessel representations, and when closed-form transforms are unavailable, the volatility integral can be calculated by solving the backward equation frequency by frequency.