Re: Stochastic Volatility

Posted by Stephen Tse-2 on
URL: http://quantlib.414.s1.nabble.com/Stochastic-Volatility-tp12534p12535.html

Have you tried to implement it using other language and check the accuracy (against European call prices which has semi-analytical formula under the Heston model)?

As far as I know, the mixed-derivative term is very difficult to handle and I have seen no research paper using standard FD method to discretize the Heston PDE. One recent paper uses ADI and may be of interest to you. Please see attachment.

On Tue, Jul 6, 2010 at 5:43 AM, animesh saxena <[hidden email]> wrote:

No FD method solution in the case of a generic partial differential equation like (Stochastic Vol Model)

for {d sigma = p dt + q dX}, p = (a – b sigma2)

Do read the pdf for bit more understanding. It's just a single page!

I am not sure if this is implemented in quantlib, or maybe I don't know how to use it.

Thanks for ur time

Animesh Saxena

Associate

(Exotic Derivatives)

Blog -> http://quantanalysis.wordpress.com



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