Theoretical and Empirical Validation of Heston Model
This study focuses on the application of the Heston model to option pricing, employing both theoretical derivations and empirical validations. The Heston model, known for its ability to incorporate stochastic volatility, is derived and analyzed to evaluate its effectiveness in pricing options. For practical application, we utilize Monte Carlo simulations alongside market data from the Crude Oil WTI market to test the model's accuracy. Machine learning based optimization methods are also applied for the estimation of the five Heston parameters. By calibrating the model with real-world data, we assess its robustness and relevance in current financial markets, aiming to bridge the gap between theoretical finance models and their practical implementations.
Code (0)
등록된 구현이 없습니다.
Tasks
modelSimilar Papers 제목 키워드 기반
Realized volatility and parametric estimation of Heston SDEs
We present a detailed analysis of \emph{observable} moments based parameter estimators for the Heston SDEs jointly driving the rate of returns $R_t$ and the squared volatilities $V_t$. Since volatilities are not directly…
Unbiased estimators for the Heston model with stochastic interest rates
We combine the unbiased estimators in Rhee and Glynn (Operations Research: 63(5), 1026-1043, 2015) and the Heston model with stochastic interest rates. Specifically, we first develop a semi-exact log-Euler scheme for the…
High order approximations and simulation schemes for the log-Heston process
We present weak approximations schemes of any order for the Heston model that are obtained by using the method developed by Alfonsi and Bally (2021). This method consists in combining approximation schemes calculated on …
Deeper Hedging: A New Agent-based Model for Effective Deep Hedging
We propose the Chiarella-Heston model, a new agent-based model for improving the effectiveness of deep hedging strategies. This model includes momentum traders, fundamental traders, and volatility traders. The volatility…
On the relative performance of some parametric and nonparametric estimators of option prices
We examine the empirical performance of some parametric and nonparametric estimators of prices of options with a fixed time to maturity, focusing on variance-gamma and Heston models on one side, and on expansions in Herm…
Model Selection