Re: Calculating Volatility using heston Model

Posted by johari_gaurav on Apr 17, 2009; 10:26am
URL: http://quantlib.414.s1.nabble.com/Calculating-Volatility-using-heston-Model-tp8110p8112.html

Thanks Michael.

Apology if I was not clear. This is what I want to do:
(1) calibrate the heston model using market data & historical volatility.
              When I say, calibration of heston model, I mean to estimate kappa, theta, rho, sigma and v0. I will provide the other parameter like dividend rate, interest rate, strike price, option price, maturity Date. Is it possible? Is there any sample code for the same?

(2) Once model is calibrated we want to draw the stochastic volatility surface.
              I will be giving some strike price and would try to get stochastic volatility for some periods like volatility at 15 days, 1 months, 2 months, 3 month (100 points like) so that I can plot that curve on the screen for each strike price. Once plotted for various various strike prices, it will look like surface. Is there any sample for that? I am not sure, how would I get stochastic volatility from calibrated heston model? which function to use? I don't see any function returning "volatility"?

Thanks,
Gaurav

MH_quant wrote

Hello Gaurav,

 

What exactly do you mean by calculating option volatility using Heston
model? Do you want to calculate vega sensitivities in the Heston Model? Or
do you want to calculate implied volatilities from a given Heston Model for
a special option? Or do you just want to calibrate the Heston model?

 

In the Heston Model you have 5 parameters that you can fit  (in Quantlib
this would be: v0, theta, kappa, sigma and rho; see documentation). In
general you calibrate these parameters to the market implied volatility
surface. Once done so you can use the Heston Model to calculate your option
prices and sensitivities.

 

I can help you with Heston model, since I gained quite a bit experience with
heston models in Quantlib. But for the beginning, I would recommend you to
have a look at the Quantlib TestSuit. There is a Class called
hestonmodel.cpp   There you can find already a lot.

 

Regards,

Michael

 

  _____  

From: johari_gaurav [mailto:[e-mail]]
Sent: Donnerstag, 16. April 2009 14:30
To: [e-mail]
Subject: [Quantlib-users] Calculating Volatility using heston Model

 

Hi, I am new to Quant lib and now confused with big set of classes and
structures. My aim is to calculate option volatility using Heston model. I
have all other data related like stirke price, dividend, option price etc. I
want to calculate it for both European and American options. Could some one
point me to any sample code, which can help me in this regard. Thanks,
Gaurav

  _____  

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23076316.html>  Volatility using heston Model
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