Named after Steven Heston, the Heston model is a mathematical model describing the evolution of the volatility of an underlying asset. It is a stochastic volatility model: such a model assumes that the volatility of the asset is not constant, nor even deterministic, but follows a random process.<\/p>\n
The Heston Model is one of the most widely used stochastic volatility (SV) models today. Its attractiveness lies in the powerful duality of its tractability and robustness relative to other SV models.<\/p>\n
(Heston 1993) proposed the following the model:<\/p>\n
dSt = \u00b5St dt + Vt St dWt1<\/p>\n
dVt = \u03ba(\u03b8 \u2212 Vt )dt + \u03c3 Vt dWt2<\/p>\n
dWt1 dWt2 = \u03c1dt<\/p>\n
A practical approach has been adopted since the focus of calibration is quite
\npractical itself. All the relevant tools are provided to facilitate this calibration
\nprocess, including M ATLAB code. This code has been con?ned to the appendix to
\nkeep the main body clutter free and \u2018quick-to-read\u2019.<\/p>\n","protected":false},"excerpt":{"rendered":"
Named after Steven Heston, the Heston model is a mathematical model describing the evolution of the volatility of an underlying asset. It is a stochastic volatility model: such a model assumes that the volatility of the asset is not constant, nor even deterministic, but follows a random process. The Heston Model is one of the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[7067,7328,2390,7329],"class_list":{"0":"post-2801","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-general","7":"tag-heston-model","8":"tag-stochastic-volatility-models","9":"tag-stock-volatility","10":"tag-volatility","11":"entry"},"_links":{"self":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/2801","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/comments?post=2801"}],"version-history":[{"count":0,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/2801\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/media?parent=2801"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/categories?post=2801"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/tags?post=2801"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}