HestonProcess: Class '"HestonProcess"'

In klausspanderen/RHestonSLV: R Implementation of the Heston Stochastic Local Volatility Model

Description

The Heston process is give by

\begin{array}{ll} dS_t = (r_t-q_t)S_tdt + √{ν_t}S_tdW_t^S \\ dν_t = κ(θ-ν_t)dt+σ√{ν_t}dW_t^ν \\ ρ dt = dW_t^S dW_t^ν \end{array}

Objects from the Class

An object represents the paramter of a Heston process. Objects can be created by calls of the form new("HestonProcess", ...) or HestonProcess(r, q, spot, v0, kappa, theta, sigma, rho).

Slots

r:

domestic interest rate as a function of time (continuous compounding, Actual365Fixed)

q:

divident rate or foreign interest rate as a function of time (continuous compounding, Actual365Fixed)

spot:

current price of the underlying stock or fx rate

v0:

spot variance ν_{t=0}

kappa:

rate at which ν_t reverts to θ

theta:

mean reversion level of the variance ν_t

sigma:

volatility of volatility

rho:

correlation between spot and variance increments

Examples

> process <- HestonProcess(function(t) { 0.02 },
                           function(t) { 0.01 },
                           100, 0.09, 2.0, 0.06, 0.4, -0.75)

> process
HestonProcess
  r(t=0):  0.02
  q(t=0):  0.01
  spot  :  100
  v0    :  0.09
  kappa :  2
  theta :  0.06
  sigma :  0.4
  rho   :  -0.75

> process["rho"]
[1] -0.75
> process["sigma"] <- 0.2
> process["sigma"]
[1] 0.2
> process["sigma"] <- -0.2
 Error in validObject(x) :
   invalid class "HestonProcess" object: negative sigma was given.
> process["rho"] <- 2
 Error in validObject(x) :
   invalid class "HestonProcess" object: correlation rho must stay between [-1,1].

klausspanderen/RHestonSLV documentation built on Oct. 4, 2021, 11:10 a.m.