I am dealing with Heston model in R and for this purpose I am using the package fOptions from RMetrics.

The calibration formula requires the specification of some parameters (omega, lamda, alpha, gamma and beta) to then optimize with MLE.

However, having in mind the classical formulation of Heston model, I do not manage to understand what the function parameters are referring to. I managed to understand that omega represents the long-term variance, as well as alpha an autoregressive component. However, it would be very helpful to look at the model behind this function. Does anyone know how to reference it?

Also, do you reccommend any other R package for implementing Heston model?

Many thanks, Vito


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