24. September 2008

A Simple and Exact Simulation Approach to the Heston Model

In this paper we will propose a simple approach to simulating Heston model

efficiently and accurately. All existing simulation schemes so far directly

work with the mean-reverting square root process of the variance in Heston

model, instead we transform the variance to an equivalent volatility which

follows a mean-reverting Ornstein-Uhlenbeck process….

Key words: Simulation, Stochastic volatility, Heston model, Mean-reverting

squared root process, Mean-reverting Ornstein-Uhlenbeck process, Option

prices.

Zurück zu "Publications"