On the density of log-spot in the Heston volatility model

Sebastian Del Bao Rollin, Albert Ferreiro-Castilla, Frederic Utzet

Research output: Contribution to journalArticleResearchpeer-review

12 Citations (Scopus)

Abstract

This paper proves that the log-spot in the Heston model has a C∞ density and gives an expression of this density as an infinite convolution of Bessel type densities. Such properties are deduced from a factorization of the characteristic function, mainly obtained through an analysis of the complex moment generating function. As an application a new algorithm to simulate spot is developed. © 2010 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)2037-2063
JournalStochastic Processes and their Applications
Volume120
Issue number10
DOIs
Publication statusPublished - 1 Sep 2010

Keywords

  • Bessel random variables
  • Characteristic function
  • Heston volatility model

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