Not sure if I understand well your question. You could use Heston with piecewise constant parameterization to calibrate a given smile surface.Dear all,
I wonder whether it is logical to look at the term structure of the parameters in Heston model.
I mean do you think it is logical to calibrate Heston model to a spesific maturity on a spesific day(and doing this seperately for every maturity) and looking at evolution of the term structure of parameters by following the same procedure.
Do you have any experience about this?
Your help will be very appreciated.
what's your problem exactly? I haven't seen any result on page 29, except a graph of error calibration with no numerical output.The idea is not really hard but there are some trivial work to do. I am researching that. Hope crack it asap!
using fminsearch in Matlab will do the trickYou should use a global optimization technique (e.g. SA) to calibrate the model since you could end up in a local minima when using nonlinear least squares method. The optimization problem is not convex.