SERVING THE QUANTITATIVE FINANCE COMMUNITY

## Search found 13 matches

March 30th, 2015, 9:56 am
Forum: General Forum
Topic: How to interpret the correlation from Heston model calibration?
Replies: 9
Views: 4022

### How to interpret the correlation from Heston model calibration?

<r>QuoteOriginally posted by: EdisonCruiseThank you Alan.The underlying is an ETF mutual fund in a developing country.The BS implied vols for call option are not smooth even only OTM options are included. The BS implied vols for put option are just going down from low strike to high strike, which is...
March 24th, 2015, 5:43 am
Forum: Student Forum
Topic: The Heston Model and a positive Rho? Possible?
Replies: 8
Views: 3155

### The Heston Model and a positive Rho? Possible?

<t>QuoteOriginally posted by: boulala666@JSHellen: thanks for the very detailed answer. I will try my best to implement it :)I have some Matlab code on my old computer but its in different country. You should do it yourself to gain more confidence solving this kind of problems. But it you are still ...
March 23rd, 2015, 4:32 pm
Forum: Student Forum
Topic: The Heston Model and a positive Rho? Possible?
Replies: 8
Views: 3155

### The Heston Model and a positive Rho? Possible?

<r>QuoteOriginally posted by: boulala666Thank you both.@JSHellen: I have the Vol Surface for each day, but I calibrate each Maturity of the surface seperately. Do you mean I should do one calibration for each day including every maturity? Am I right?Yes I was thinking about a global calibration for ...
March 23rd, 2015, 11:44 am
Forum: Student Forum
Topic: The Heston Model and a positive Rho? Possible?
Replies: 8
Views: 3155

### The Heston Model and a positive Rho? Possible?

<t>I have some experience of the Heston calibration using equity options. Generally speaking, the calibration gets more stable when you calibrate to a vol surface instead of a skew. If you have just time series for a single skew you may end up getting decent fit BUT very unstable and economically un...
March 23rd, 2015, 6:35 am
Forum: Student Forum
Topic: Vanna-Volga & Cramers Rule
Replies: 0
Views: 2527

### Vanna-Volga & Cramers Rule

<r>Hi,My question is related to the technicalities of arriving at the weights w1, w2 and w3 when applying the Vanna-Volga method. Castanga & Mercurio (2005) say that the solution for these weights may be found using the Cramer's Rule implying that the determinant of the "vega-vanna-volga"-matrix...
August 5th, 2014, 3:34 pm
Forum: Student Forum
Topic: Heston parameters
Replies: 6
Views: 4010

### Heston parameters

<r>Calibration works now and all parameters seem to be quite stable. I used initial parameters from a paper "A Perfect Calibration! Now What?" <URL url="http://workshop.mathfinance.com/2005/papers/tistaert/extension.pdf"><LINK_TEXT text="http://workshop.mathfinance.com/2005/pa ... ension.pdf">http:/...
August 4th, 2014, 8:50 am
Forum: Student Forum
Topic: Heston parameters
Replies: 6
Views: 4010

### Heston parameters

<t>QuoteOriginally posted by: spursfanBefore asking for help, the least you can do is spend some time seeing what others have done - no more than a few minutes with Google - Heston calibration smart parameters were my four chosen wordsThis is the first article returnedhttp://papers.ssrn.com/sol3/pap...
August 4th, 2014, 6:37 am
Forum: Student Forum
Topic: Heston parameters
Replies: 6
Views: 4010

### Heston parameters

<t>I have not tried alternative objective functions. I tried to search for academic studies about which cost function is the "best" but there seems to be no consensus whatsoever. They all seem to yield different parameters.This might sound abit stupid question, but why should I use the implied vol i...
August 3rd, 2014, 3:08 pm
Forum: Student Forum
Topic: Heston parameters
Replies: 6
Views: 4010

### Heston parameters

<t>Hello,I am calibrating the Heston (93) model to real S&P500 option data from 23.6.2005 - 14.6.2007 using Matlab fmincon optimization with the following initial guesses and constraints:x0 =[4.190.05 0.15 0.05 -0.95]lb = [e e e e -.999] % Lower bounds for the parameter estimates ub = [100 10 10...
June 13th, 2014, 8:27 pm
Forum: Student Forum
Topic: Expectation of max(S-K;O
Replies: 2
Views: 4287

### Expectation of max(S-K;O

Thanks!
June 13th, 2014, 8:12 pm
Forum: Student Forum
Topic: Delta Hedging using actual volatility
Replies: 2
Views: 4603

### Delta Hedging using actual volatility

<t>Bear with me folks, but I dont quite understand the mark-to-market profit formula on page 200 & 201 (especially). Correct me if I am wrong in my logic:First, at the beginning of day 0 you buy the option for $V^i$ and use "actual" (the true underlying) volatility to determine the magnitude...
June 9th, 2014, 6:00 am
Forum: Student Forum
Topic: Expectation of max(S-K;O
Replies: 2
Views: 4287

### Expectation of max(S-K;O

<t>Dear Wilmott community,I have been wondering this particular problem for several days and tried several approaches to get the solution. This should be quite trivial and elementary. However, I am unable to derive the solution myself.How do you implement integration by parts to get the solution:[\$]...
July 10th, 2013, 3:06 pm
Forum: Student Forum
Topic: The Mean Square Limit
Replies: 4
Views: 8820

### The Mean Square Limit

<t>Hello everyone,This is officially my first post here!I'm going to start my master studies later this year but I decided to take a head start and read some interesting text books in summer. So it has been almost two years since I completed my calculus courses. I started to skim through and study W...

GZIP: On