- Joined
- 3/18/08
- Messages
- 1
- Points
- 11
Hello.
I need you help about the simulation of Heston Model.
I need to simulate this model using a Euler discetization scheme.
My problemes are :
Which values choose for the parameters. I found estimation on papers but i don't know if it's daily or annuals estimation ....
V0 = 0.1, k=2, theta = 0.01, sigma = 0.1, rho = 0.3, mu = ? 0.03 ?
I used a step of 0.02 = 1/50
I need to simulate daily assets values. I use the R code (also test in C++) below :
Heston<- function(mu, kapa, theta, sigma, rho)
{
v<-rep(0,100000)
x<-rep(0,100000)
v[1]<-0.01
x[1]<-5000
for (i in 2:100000)
{
normale1<-rnorm(1,0,1)
normale2<-rnorm(1,0,1)
normale3<-rho*normale1 + sqrt(1-rho*rho)*normale2
x<-x[i-1]*(1 + (mu/50) + sqrt(v[i-1]/50)*normale1)
v<-abs((kapa*theta/50) + (1-(kapa/50))*v[i-1] + sigma*sqrt(v[i-1]/50)*normale3)
}
x
}
Heston(0.0001,2,0.01,0.1,-0.3)
I also try to simulate returns (using ito lemme) but resultts were also very bad.
Fabien
I need you help about the simulation of Heston Model.
I need to simulate this model using a Euler discetization scheme.
My problemes are :
Which values choose for the parameters. I found estimation on papers but i don't know if it's daily or annuals estimation ....
V0 = 0.1, k=2, theta = 0.01, sigma = 0.1, rho = 0.3, mu = ? 0.03 ?
I used a step of 0.02 = 1/50
I need to simulate daily assets values. I use the R code (also test in C++) below :
Heston<- function(mu, kapa, theta, sigma, rho)
{
v<-rep(0,100000)
x<-rep(0,100000)
v[1]<-0.01
x[1]<-5000
for (i in 2:100000)
{
normale1<-rnorm(1,0,1)
normale2<-rnorm(1,0,1)
normale3<-rho*normale1 + sqrt(1-rho*rho)*normale2
x<-x[i-1]*(1 + (mu/50) + sqrt(v[i-1]/50)*normale1)
v<-abs((kapa*theta/50) + (1-(kapa/50))*v[i-1] + sigma*sqrt(v[i-1]/50)*normale3)
}
x
}
Heston(0.0001,2,0.01,0.1,-0.3)
I also try to simulate returns (using ito lemme) but resultts were also very bad.
Fabien