Dear Moeti NCube
I have read several discussions of
pricing and calibration of Heston model and I am wondering if you have encountered the problems alluded to in the following comments on calibrating Heston and pricing Heston calls given parameters:
(1) pricing the option using Heston' formulas " gives rise to an inherent numerical instability as a
consequence of which most implementations of Heston’s formulæ are not robust for moderate to long dated maturities or strong mean reversion."
(2) the calibration can get bogged down in local minima and can take a long time
Hey every one I am trying to run this code as it is but I get the message " Undefined function 'lsqnonlin' for input arguments of type'function_handle'.
Error in hestoncalibrationexample (line 36)
x = lsqnonlin(@costf2,x0,lb,ub);
Any body can help me with this problem?
thanks in advance
Dear Moeti Ncube
Thanks for your code, it does help me a lot!
But I have a question for results.
In general, the simulated price should be very close to the Heston model price, right?
But why it seem that there is a gap between "simhes" and "modhes"?