• C++ Programming for Financial Engineering
    Highly recommended by thousands of MFE students. Covers essential C++ topics with applications to financial engineering. Learn more Join!
    Python for Finance with Intro to Data Science
    Gain practical understanding of Python to read, understand, and write professional Python code for your first day on the job. Learn more Join!
    An Intuition-Based Options Primer for FE
    Ideal for entry level positions interviews and graduate studies, specializing in options trading arbitrage and options valuation models. Learn more Join!

Stochastic vol model

Lun

Joined
3/1/07
Messages
74
Points
18
There are several stochastic vol models, what I'm studying is Heston. What the paper (written by Heston) studies is European options, but nowadays the popular use of stochastic vol models is to price exotic options, where can I find more information ? Say, an example to price an exotic option with a stochastic vol model. I mean, I don't know where I can get related resources (application of stochastic vol models on options other than European options)
 
"Option Pricing and Portfolio Optimization: Modern Methods of Financial Mathematics" by Ralf and Elke Korn has good amount of information on pricing exotics.

Had used the Schobucher framework in a previous assignment. Attached.
 

Attachments

  • Schonbucher Framework.pdf
    319.1 KB · Views: 79
Anyone has any more idea on this topic ? Thanks !
 
Exotic Options with Heston Model

Lun,

I wrote a paper which contains an application of the Heston model to American option pricing with Monte Carlo simulation (and also stochastic interest rates).

You find it on the Web site American Options with Heston Model ("Stochastic Volatility and Stochastic Interest Rates").

In addition there is also a paper available which analyzes Heston (1993) in more detail and provides a full set of Python scripts (calles "Calibrating Heston's Stochastic Volatility Model").

Moreover, if you like you can try out our on demand Derivatives Analytics suite with which you can use Heston (1993) for almost any (equity) derivative instrument.

Yves
 
Back
Top