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Application of Heston model and its solution to German DAX data

Author

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  • Remer, R.
  • Mahnke, R.

Abstract

We compare two well-known examples of stochastic volatility models, the Heston model and the Hull–White model. We derive the stationary probability density distribution of the variance. In addition, we apply this stationary solution to the probability density distribution of the logarithmic returns by using the conditional probability density distribution. Furthermore, we compare the received solutions of the logarithmic returns with empirical high-frequency data of DAX and its stocks.

Suggested Citation

  • Remer, R. & Mahnke, R., 2004. "Application of Heston model and its solution to German DAX data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 236-239.
    • Handle: RePEc:eee:phsmap:v:344:y:2004:i:1:p:236-239
    DOI: 10.1016/j.physa.2004.06.124
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    Cited by:

    1. Dong, Yang & Wen, Shu-hui & Hu, Xiao-bing & Li, Jiang-Cheng, 2020. "Stochastic resonance of drawdown risk in energy market prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 540(C).
    2. Nakamura, Tomomichi & Small, Michael, 2007. "Tests of the random walk hypothesis for financial data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 377(2), pages 599-615.
    3. Buchbinder, G.L. & Chistilin, K.M., 2007. "Multiple time scales and the empirical models for stochastic volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 379(1), pages 168-178.

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