XploRe Help : pdfHeston

Keywords - Function groups - @ A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Library:	finance
See also:	pdfHestonInt HestonCall

Quantlet:		pdfHeston
Description:		computes the probability density function in Heston stochastic volatility model.

Reference(s):

[1] A.A. Dragulescu, V.M. Yakovenko (2002) Probability distribution of returns in the Heston model with stochastic volatility, Quantitative Finance 2: 443-453. [2] R. Weron, U. Wystup (2005) Heston's model and the smile, in "Statistical Tools for Finance and Insurance", eds. P. Cizek, W. Härdle, R. Weron, Springer.

Usage:	`y = pdfHeston(x,theta,kappa,sigma,rho,t{,par})`
Input:
	`x`	array, input values
	`theta`	scalar, long-run variance
	`kappa`	scalar, level of mean reversion
	`sigma`	scalar, volatility of variance (vol of vol)
	`rho`	scalar, correlation
	`t`	scalar, time lag
	`par`	scalar, optional, if par<>0 the pdf is plotted, else (default) the pdf is computed only
Output:
	`y`	array, the values of Heston's probability density function

Example:

library("finance") pdfHeston((-2:2)/2,0.04,2,0.3,-0.05,1)

Result:

Contents of y

[1,]  0.00060938
[2,]  0.086909
[3,]   2.2381
[4,]  0.10328
[5,]  0.00077533

Author: R. Weron, 20040730 license MD*Tech