HESTONVANILLAFITSMILE: MATLAB function to fit the Heston (1993) option pricing model to the FX market implied volatility smile

Agnieszka Janek and Rafał Weron

Statistical Software Components from Boston College Department of Economics

Abstract: HESTONVANILLAFITSMILE returns initial volatility V0, vol of vol VV, mean reversion KAPPA, long-run mean THETA, correlation RHO, vector of Garman-Kohlhagen implied volatilities IV and a sum of squared errors SSE given a vector of spot delta values DELTA, vector of the market implied volatilities MARKETVOLS, spot price SPOT, domestic and foreign interest rates RD and RF, time to maturity (in years) TAU and option type (Call/Put).

Language: MATLAB
Requires: MATLAB (tested on MATLAB ver. 7.9; in earlier versions of MATLAB instead of quadgk.m use quadva.m by L.F.Shampine, J. Computational and Applied Mathematics 211, 2008, 131-140), GARMANKOHLHAGEN, HESTONVANILLA (both available from SSC).
Keywords: Option premium; FX option; Volatility smile; Stochastic volatility; Heston (1993) model; Garman and Kohlhagen (1983) model. (search for similar items in EconPapers)
Date: 2010-12-27
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