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SIMHESTON: MATLAB function to simulate trajectories of the spot price and volatility processes in the Heston (1993) model

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Author Info

  • Agnieszka Janek

    (Wroclaw University of Technology)

  • Rafal Weron

    ()
    (Wroclaw University of Technology)

Abstract

SIMHESTON returns a 2-column array, containing the simulated trajectories of the spot price S(t) and volatility v(t) for t=0:DELTA:N, in the model: dS(t) = mu*S(t)*dt + v^0.5*S(t)*dW1(t), dv(t) = kappa*(theta - v(t))*dt + sigma*(v(t)^0.5)*dW2(t), Cov[dW1(t),dW2(t)] = rho*dt, given starting value of the spot price process S0, starting value of the volatility process V0, drift MU, speed of mean reversion of the volatility process KAPPA,long-term mean of the volatility process THETA, volatility SIGMA, correlation between the spot price and volatility processes RHO, time endpoint N, a 2-column vector of normally distributed pseudorandom numbers NO and a flag denoting used simulation scheme (Quadratic-Exponential scheme, Euler scheme with absorption or reflection for the volatility process).

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File URL: http://fmwww.bc.edu/repec/bocode/s/simheston.m
File Function: program file
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Bibliographic Info

Software component provided by Boston College Department of Economics in its series Statistical Software Components with number M430009.

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Programming language: MATLAB
Requires: MATLAB (tested on MATLAB ver. 7.9).
Date of creation: 27 Dec 2010
Date of revision:
Handle: RePEc:boc:bocode:m430009

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Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Phone: 617-552-3670
Fax: +1-617-552-2308
Email:
Web page: http://fmwww.bc.edu/EC/
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Web: http://repec.org/docs/ssc.php

Related research

Keywords: FX option; Stochastic volatility; Heston (1993) model; Sample trajectory; Quadratic-Exponential scheme; Euler scheme; absorption; reflection.;

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