José Da Fonseca and Martino Grasselli and Claudio Tebaldi

Finance Group (2008) : A Multifactor Volatility Heston Model

A Multifactor Volatility Heston Model

José Da Fonseca and Martino Grasselli and Claudio Tebaldi


Quantitative Finance

We model the volatility of a single risky asset using a multifactor (matrix) Wishart affine process, recently introduced in finance by Gourieroux and Sufana. As in standard Duffie and Kan affine models the pricing problem can be solved through the Fast Fourier Transform of Carr and Madan. A numerical illustration shows that this specification provides a separate fit of the long-term and short-term implied volatility surface and, differently from previous diffusive stochastic volatility models, it is possible to identify a specific factor accounting for the stochastic leverage effect, a well-known stylized fact of the FX option markets analysed by Carr and Wu. A multifactor volatility Heston model - ResearchGate. Available from: [accessed Jul 3, 2015].

To cite this publication :

Giorgia Callegaro, Lucio Fiorin, Martino Grasselli: Quantized calibration in local volatility models. Dans: Risk Magazine, 9 , p. 62-67, 2015, ISSN: 0952-8776.


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