The Heston stochastic volatility model in Hilbert space
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Publication:4685702
Abstract: We extend the Heston stochastic volatility model to a Hilbert space framework. The tensor Heston stochastic variance process is defined as a tensor product of a Hilbert-valued Ornstein-Uhlenbeck process with itself. The volatility process is then defined by a Cholesky decomposition of the variance process. We define a Hilbert-valued Ornstein-Uhlenbeck process with Wiener noise perturbed by this stochastic volatility, and compute the characteristic functional and covariance operator of this process. This process is then applied to the modelling of forward curves in energy markets. Finally, we compute the dynamics of the tensor Heston volatility model when the generator is bounded, and study its projection down to the real line for comparison with the classical Heston dynamics.
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Cited in
(27)- Infinite dimensional affine processes
- A complete Markovian stochastic volatility model in the HJM framework
- Well-posedness and invariant measures for HJM models with deterministic volatility and Lévy noise
- On Singularities in the Heston Model
- Stochastic volatility models at = 1 as second class constrained Hamiltonian systems
- A feasible central limit theorem for realised covariation of SPDEs in the context of functional data
- Series Expansions and Direct Inversion for the Heston Model
- The Heston Riemannian distance function
- Affine pure-jump processes on positive Hilbert-Schmidt operators
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- Sensitivity analysis in the infinite dimensional Heston model
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- An infinite‐dimensional affine stochastic volatility model
- Independent increment processes: a multilinearity preserving property
- Application of the Heston stochastic volatility model for Borsa Istanbul using impression matrix norm
- THE 4/2 STOCHASTIC VOLATILITY MODEL: A UNIFIED APPROACH FOR THE HESTON AND THE 3/2 MODEL
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