Exact simulation of the wishart multidimensional stochastic volatility model

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In this article, we propose an exact simulation method of the Wishart multidimensional stochastic volatility (WMSV) model-a single asset model with a multidimensional Wishart variance process. Our method is based on analysis of the conditional characteristic function of the log-price given a terminal volatility level. In particular, we found an explicit expression for the conditional characteristic function for the Heston model. Numerical experiments demonstrate that our new method is much faster and reliable than the Euler discretization method.
Publisher
INFORMS
Issue Date
2017-09
Language
English
Article Type
Article
Keywords

POSITIVE SEMIDEFINITE MATRICES; CURRENCY OPTIONS; AFFINE PROCESSES; EFFICIENT; ARGUMENT; ORDER

Citation

OPERATIONS RESEARCH, v.65, no.5, pp.1190 - 1206

ISSN
0030-364X
DOI
10.1287/opre.2017.1636
URI
http://hdl.handle.net/10203/226636
Appears in Collection
MA-Journal Papers(저널논문)
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