The heston tag has no wiki summary.
8
votes
3answers
428 views
Implementing a Fast Fourier Transform for Option Pricing
So, I'm in need of some tips regarding a small project I'm doing. My goal is an implementation of a Fast Fourier Transform algorithm (FFT) which can be applied to the pricing of options.
First ...
4
votes
2answers
232 views
What is Heston's equation?
This paper mentions the elliptic Heston operator:
$Av:= -\frac y2(v_{xx}+2\rho\sigma v_{xy} + \sigma^2v_{yy}) - (c_0 - q - \frac y2)v_x + \kappa(\theta -y)v_y + c_0v$.
Then boundary value problem ...
3
votes
3answers
118 views
Avoiding negative volatility when applying Heston model
When applying the Heston model to generate the sample volatility surface, some of the volatility value will be negative. I am just wondering what do practioners normally do with these negative value. ...
2
votes
4answers
159 views
Other means of calibrating Heston models
I understand that the simplest way of calibrating a Heston model for volatility surface is to use Monte-Carlo to simulate the vol and stock price trajectories and then use the observed price to do a ...
2
votes
0answers
263 views
Can the Heston model be shown to reduce to the original Black Scholes model if appropriate parameters are chosen?
Summary
For Heston model parameters that render the variance process constant, the solution should revert to plain Black-Scholes. Closed from solutions to the Heston model don't seem to do this, even ...
1
vote
0answers
49 views
Problems with exact Heston simulations
I am just wondering if there is any problem with the so-called "exact" Heston simulations? So far what I have seen are the good things about it, what are the disadvantages? Because if it is so ...
