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First, to make that clear: The Heston model does not generate negative volatility, but - for example - an Euler discretization of the Heston model may generate negative volatility (or variance). It is not a problem of the model. It is a problem of the numerical scheme. If you use an Euler scheme which generates negative volatility and then use any of the ...


It is not necessarily something that must be wrong with your model. Inherent in the Heston discretization methods of its continuous time dynamics is the possibility of negative values in the variance process. Here are couple solutions you can look at in order to "fix" your problem: Usage of different Euler schemes, such as the Full Truncation scheme. ...


There are by now a lot of papers on discretizations of Heston. One objective of them being to avoid negativity. As has already been said, the Heston SDE has no negative solutions, but a crude discretization does give negative variance with positive probability. If you want to do small steps, then using a log-normal approximation or the QE approximation ...


Negative volatility means something some where along the lines something is inherently wrong with your model, double check your code and theory


http://uk.reuters.com/article/2012/11/27/efsf-bond-idUKL5E8MR6I220121127 Nov 27: The order book on the European Financial Stability Facility one-year syndicated issue is over EUR 5bn according to a bookrunner on the deal. The eurozone rescue fund opened books this morning via JP Morgan, Morgan Stanley and Natixis at guidance of 0.23% to 0.25% with pricing ...


1) JPY yield curve is currently upward sloping, not inverted... 2) Empirically, an upward sloping yield curve predicts recessions, not an inverted one. See this famous paper http://newyorkfed.org/research/current_issues/ci2-7.pdf

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