A Note on Essential Smoothness in the Heston Model
Posted: 15 Jul 2011 Last revised: 19 Apr 2013
Date Written: July 13, 2011
This note identifies a gap in the proof of Corollary 2.4 in , which arises because the essential smoothness of the family (Xt/t) can fail for the log-spot process X in the Heston model, and describes how to circumvent the issue by applying a standard argument from large deviation theory.
Keywords: Essential smoothness, large deviation principle, Heston model
JEL Classification: C02, C63, G12, G13
Suggested Citation: Suggested Citation