A Note on the Malliavin Differentiability of the Heston Volatility
11 Pages Posted: 15 Nov 2005
Date Written: January 2005
We show that the Heston volatility or equivalently the Cox-Ingersoll-Ross process is Malliavin differentiable and give an explicit expression for the derivative. This result assures the applicability of Malliavin calculus in the framework of the Heston stochastic volatility model and the Cox-Ingersoll-Ross model for interest rates.
Keywords: Malliavin calculus, stochastic volatility models, Heston model, Cox-Ingersoll-Ross process
JEL Classification: G12, G19, C19, E43
Suggested Citation: Suggested Citation