SIMHESTON: MATLAB function to simulate trajectories of the spot price and volatility processes in the Heston (1993) model
AbstractSIMHESTON 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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Bibliographic InfoSoftware component provided by Boston College Department of Economics in its series Statistical Software Components with number M430009.
Programming language: MATLAB
Requires: MATLAB (tested on MATLAB ver. 7.9).
Date of creation: 27 Dec 2010
Date of revision:
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Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Web page: http://fmwww.bc.edu/EC/
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