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What is “Lambda” in Heston's original paper on stochastic volatility models?

1

$begingroup$

In his paper (link), he has the equations:

b1 = k + ƛ - (ρ * σ)

b2 = k + ƛ

k is the rate of mean reversion, ρ is the correlation between the two Wiener processes, σ is vol of vol, what is ƛ?

I have yet to figure out what ƛ is.

Thanks!

options stochastic-processes

share|improve this question

edited 2 hours ago

Alex C

6,73211123

asked 2 hours ago

vt_ogvt_og

162

$endgroup$

add a comment | 

1

$begingroup$

In his paper (link), he has the equations:

b1 = k + ƛ - (ρ * σ)

b2 = k + ƛ

k is the rate of mean reversion, ρ is the correlation between the two Wiener processes, σ is vol of vol, what is ƛ?

I have yet to figure out what ƛ is.

Thanks!

options stochastic-processes

share|improve this question

edited 2 hours ago

Alex C

6,73211123

asked 2 hours ago

vt_ogvt_og

162

$endgroup$

add a comment | 

$begingroup$

In his paper (link), he has the equations:

b1 = k + ƛ - (ρ * σ)

b2 = k + ƛ

k is the rate of mean reversion, ρ is the correlation between the two Wiener processes, σ is vol of vol, what is ƛ?

I have yet to figure out what ƛ is.

Thanks!

options stochastic-processes

share|improve this question

edited 2 hours ago

Alex C

6,73211123

asked 2 hours ago

vt_ogvt_og

162

$endgroup$

share|improve this question

edited 2 hours ago

Alex C

6,73211123

asked 2 hours ago

vt_ogvt_og

162

share|improve this question

edited 2 hours ago

Alex C

6,73211123

asked 2 hours ago

vt_ogvt_og

162

edited 2 hours ago

Alex C

6,73211123

edited 2 hours ago

Alex C

6,73211123

asked 2 hours ago

vt_ogvt_og

162

asked 2 hours ago

vt_ogvt_og

162

2 Answers
2

active

oldest

votes

1

$begingroup$

It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:

share|improve this answer

answered 2 hours ago

Magic is in the chainMagic is in the chain

1,05915

$endgroup$

add a comment | 

0

$begingroup$

That is the "price of volatility risk" (see Page 329)

share|improve this answer

answered 2 hours ago

Alex CAlex C

6,73211123

$endgroup$

add a comment | 

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1

$begingroup$

It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:

share|improve this answer

answered 2 hours ago

Magic is in the chainMagic is in the chain

1,05915

$endgroup$

add a comment | 

1

$begingroup$

It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:

share|improve this answer

answered 2 hours ago

Magic is in the chainMagic is in the chain

1,05915

$endgroup$

add a comment | 

$begingroup$

It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:

share|improve this answer

answered 2 hours ago

Magic is in the chainMagic is in the chain

1,05915

$endgroup$

share|improve this answer

answered 2 hours ago

Magic is in the chainMagic is in the chain

1,05915

answered 2 hours ago

Magic is in the chainMagic is in the chain

1,05915

answered 2 hours ago

Magic is in the chainMagic is in the chain

1,05915

0

$begingroup$

That is the "price of volatility risk" (see Page 329)

share|improve this answer

answered 2 hours ago

Alex CAlex C

6,73211123

$endgroup$

add a comment | 

0

$begingroup$

That is the "price of volatility risk" (see Page 329)

share|improve this answer

answered 2 hours ago

Alex CAlex C

6,73211123

$endgroup$

add a comment | 

$begingroup$

That is the "price of volatility risk" (see Page 329)

share|improve this answer

answered 2 hours ago

Alex CAlex C

6,73211123

$endgroup$

share|improve this answer

answered 2 hours ago

Alex CAlex C

6,73211123

answered 2 hours ago

Alex CAlex C

6,73211123

answered 2 hours ago

Alex CAlex C

6,73211123