Roughening Heston

11 Pages Posted: 14 Feb 2018 Last revised: 21 Feb 2018

See all articles by Omar El Euch

Omar El Euch

Ecole Polytechnique, Paris

Jim Gatheral

CUNY Baruch College

Mathieu Rosenbaum

Ecole Polytechnique, Palaiseau

Date Written: February 20, 2018

Abstract

Rough volatility models are known to fit the volatility surface remarkably well with very few parameters. On the other hand, the classical Heston model is highly tractable allowing for fast calibration. We present here the rough Heston model which offers the best of both worlds. Even better, we find that we can accurately approximate rough Heston model values by scaling the volatility of volatility parameter of the classical Heston model.

Suggested Citation

El Euch, Omar and Gatheral, Jim and Rosenbaum, Mathieu, Roughening Heston (February 20, 2018). Available at SSRN: https://ssrn.com/abstract=3116887 or http://dx.doi.org/10.2139/ssrn.3116887

Omar El Euch

Ecole Polytechnique, Paris ( email )

1 rue Descartes
Paris, 75005
France

Jim Gatheral (Contact Author)

CUNY Baruch College ( email )

Department of Mathematics
One Bernard Baruch Way
New York, NY 10010
United States

Mathieu Rosenbaum

Ecole Polytechnique, Palaiseau ( email )

Route de Saclay
Palaiseau, 91128
France

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