Simulation of Heston made simple
A new way to apply the classic stochastic volatility model is presented
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Eduardo Abi Jaber introduces a simple, efficient and accurate numerical scheme that preserves non-negativity for simulating the square-root process. The novel idea is to first simulate the integrated square-root process instead of the square-root process itself. Numerical experiments on realistic parameter sets, applied for the Heston model, display high precision
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