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



Planned maintenance scheduled April 23, 2019 at 23:30 UTC (7:30pm US/Eastern)
Announcing the arrival of Valued Associate #679: Cesar Manara
Unicorn Meta Zoo #1: Why another podcast?Definition of orthogonality and independence for a stochastic processesDo we need Feller condition if volatility process jumps?Cointegration and variance of time seriesSpeed of mean reversion of an interest rate modelHow to price a stock under Q and stochastic interest rates?Fractional Brownian motion - probability density function of the incrementsVector of differences of Brownian motion integrals is multivariate normalStandard definition of multidimensional Brownian Motion with correlationsWhat is a stochastic processes which reasonably captures commodity price dynamics?Integral of Wiener process w.r.t. time










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!










share|improve this question











$endgroup$
















    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!










    share|improve this question











    $endgroup$














      1












      1








      1


      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!










      share|improve this question











      $endgroup$




      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















      share|improve this question













      share|improve this question




      share|improve this question








      edited 3 hours ago









      Alex C

      6,73211123




      6,73211123










      asked 3 hours ago









      vt_ogvt_og

      162




      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:



          enter image description here






          share|improve this answer









          $endgroup$




















            0












            $begingroup$

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






            share|improve this answer









            $endgroup$













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              2 Answers
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              2 Answers
              2






              active

              oldest

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              active

              oldest

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              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:



              enter image description here






              share|improve this answer









              $endgroup$

















                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:



                enter image description here






                share|improve this answer









                $endgroup$















                  1












                  1








                  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:



                  enter image description here






                  share|improve this answer









                  $endgroup$



                  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:



                  enter image description here







                  share|improve this answer












                  share|improve this answer



                  share|improve this answer










                  answered 3 hours ago









                  Magic is in the chainMagic is in the chain

                  1,05915




                  1,05915





















                      0












                      $begingroup$

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






                      share|improve this answer









                      $endgroup$

















                        0












                        $begingroup$

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






                        share|improve this answer









                        $endgroup$















                          0












                          0








                          0





                          $begingroup$

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






                          share|improve this answer









                          $endgroup$



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







                          share|improve this answer












                          share|improve this answer



                          share|improve this answer










                          answered 3 hours ago









                          Alex CAlex C

                          6,73211123




                          6,73211123



























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