A Note on Essential Smoothness in the Heston Model

Posted: 15 Jul 2011 Last revised: 19 Apr 2013

See all articles by Antoine (Jack) Jacquier

Antoine (Jack) Jacquier

Imperial College London; The Alan Turing Institute

Aleksandar Mijatovic

Imperial College London

Martin Forde

Dublin City University - Department of Mathematical Sciences

Date Written: July 13, 2011

Abstract

This note identifies a gap in the proof of Corollary 2.4 in [2], 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

Jacquier, Antoine and Mijatovic, Aleksandar and Forde, Martin, A Note on Essential Smoothness in the Heston Model (July 13, 2011). Finance Stochastics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1885035

Antoine Jacquier (Contact Author)

Imperial College London ( email )

South Kensington Campus
London SW7 2AZ, SW7 2AZ
United Kingdom

HOME PAGE: http://wwwf.imperial.ac.uk/~ajacquie/

The Alan Turing Institute ( email )

British Library, 96 Euston Road
London, NW12DB
United Kingdom

Aleksandar Mijatovic

Imperial College London ( email )

Department of Mathematics
180 Queen's Gate
London, SW7 2AZ
United Kingdom

HOME PAGE: http://www3.imperial.ac.uk/people/a.mijatovic

Martin Forde

Dublin City University - Department of Mathematical Sciences ( email )

Dublin
Ireland

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