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by JSHellen
March 30th, 2015, 9:56 am
Forum: General Forum
Topic: How to interpret the correlation from Heston model calibration?
Replies: 9
Views: 3870

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...
by JSHellen
March 24th, 2015, 5:43 am
Forum: Student Forum
Topic: The Heston Model and a positive Rho? Possible?
Replies: 8
Views: 3014

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 ...
by JSHellen
March 23rd, 2015, 4:32 pm
Forum: Student Forum
Topic: The Heston Model and a positive Rho? Possible?
Replies: 8
Views: 3014

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 ...
by JSHellen
March 23rd, 2015, 11:44 am
Forum: Student Forum
Topic: The Heston Model and a positive Rho? Possible?
Replies: 8
Views: 3014

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...
by JSHellen
March 23rd, 2015, 6:35 am
Forum: Student Forum
Topic: Vanna-Volga & Cramers Rule
Replies: 0
Views: 2486

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...
by JSHellen
August 5th, 2014, 3:34 pm
Forum: Student Forum
Topic: Heston parameters
Replies: 6
Views: 3885

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:/...
by JSHellen
August 4th, 2014, 8:50 am
Forum: Student Forum
Topic: Heston parameters
Replies: 6
Views: 3885

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...
by JSHellen
August 4th, 2014, 6:37 am
Forum: Student Forum
Topic: Heston parameters
Replies: 6
Views: 3885

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...
by JSHellen
August 3rd, 2014, 3:08 pm
Forum: Student Forum
Topic: Heston parameters
Replies: 6
Views: 3885

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...
by JSHellen
June 13th, 2014, 8:27 pm
Forum: Student Forum
Topic: Expectation of max(S-K;O
Replies: 2
Views: 4213

Expectation of max(S-K;O

Thanks!
by JSHellen
June 13th, 2014, 8:12 pm
Forum: Student Forum
Topic: Delta Hedging using actual volatility
Replies: 2
Views: 4530

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...
by JSHellen
June 9th, 2014, 6:00 am
Forum: Student Forum
Topic: Expectation of max(S-K;O
Replies: 2
Views: 4213

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:[$]...
by JSHellen
July 10th, 2013, 3:06 pm
Forum: Student Forum
Topic: The Mean Square Limit
Replies: 4
Views: 8728

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...
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