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Hi,I know that kappa is the speed of the mean reverting process (in the Heston model) : ds2 = kappa * (eta - s2) * dt + theta * sqrt(s2) * dWcould you give me an intuitive interpretation of this parameter, i.e if kappa 2, what does it meanThanks

Hey, The more kappa is high, the more volatility will converge rapidly to its long term mean and thus defined as follwing a mean reverting process. The impact of this parameter in the skew dynamic is relatively weak compared to the volvol or rho parameters.

I see,but if the kappa=2, I think this means that, the vol returns to the mean every 250 / 2 * 2 = 62 days. Is it correct ?Tx

think of tau=1/kappa as the decay timescale.

I would take the inverse of kappa and multiply by a factor that ajust for maturity (bring from calendar days to trading days).

Hey Sofiane,what about the meaning of Rho and Vol of Vol (skew/smile parameters) in the calibration process?thanks

rho is the correlation between the vol and the stock returns. Usually, this is negative (leverage - Black effect, check paper of Black, 1976 for an explanation)the vol of vol is simply the volatility of the volatilitythe remaining parameter, eta, is the long term variance

thanks Spaagg