Bayesian Estimation of the Multi-Factor Heston Stochastic Volatility Model

37 Pages Posted: 13 Dec 2007 Last revised: 12 Mar 2014

See all articles by Sylvia Fruhwirth-Schnatter

Sylvia Fruhwirth-Schnatter

Johannes Kepler University - Department of Applied Statistics and Econometrics

Leopold Sögner

Institute for Advanced Studies (IHS); Vienna Graduate School of Finance (VGSF)

Date Written: October 8, 2008

Abstract

The goal of this article is an exact Bayesian analysis of the Heston (1993) stochastic volatility model. We carefully study the effect different parameterizations of the latent volatility process and the parameters of the volatility process have on the convergence and the mixing behavior of the sampler. We apply the sampler to simulated data and to some DM/US$ exchange rate data.

Keywords: Heston model, MCMC, parameterization, stochastic volatility

JEL Classification: C11, C15

Suggested Citation

Fruhwirth-Schnatter, Sylvia and Sögner, Leopold, Bayesian Estimation of the Multi-Factor Heston Stochastic Volatility Model (October 8, 2008). Available at SSRN: https://ssrn.com/abstract=1070823 or http://dx.doi.org/10.2139/ssrn.1070823

Sylvia Fruhwirth-Schnatter

Johannes Kepler University - Department of Applied Statistics and Econometrics ( email )

Altenbergerstrasse 69
Linz
Austria

Leopold Sögner (Contact Author)

Institute for Advanced Studies (IHS) ( email )

Josefstädter Straße 39
1080 Vienna
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

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