We are pleased to invite you to hear Richard Lindsey, Paul Russo, Michael Mendelson, and Peter Carr at the Financial Engineering Practitioners Seminar. Sponsored by: D E Shaw & Co., Guzman & Company, ISE, Murex, Prisma Capital Partners.
The Financial Engineering Practitioners Seminar meets on Monday evenings from 6:00 pm to 7:30 pm, and is followed by a reception and refreshments. The seminars are open to the public and we welcome attendees from industry and academia.
See the fall seminar schedule at:
http://www.ieor.columbia.edu/seminars/financialengineering/2008-2009/spring/
index.html
For directions to the seminar please see below:
The Financial Engineering Practitioners Seminar is held at 412 Schapiro CEPSR in Davis Auditorium on Columbia University's Morningside Campus. Enter through campus at 116th Street and then walk north. Davis Auditorium is located in the Schapiro Center towards the north end of the Morningside campus. Please click below for a map of the campus:
www.columbia.edu/cu/aboutcolumbia/maps/index.html
Gamma Expansion of the Heston Stochastic Volatility Model
Date: 02/02/2009
Start Time: 6:00pm
End Time: 7:30pm
Speaker: Paul Glasserman, Business School: Columbia University
Location: 412 Schapiro CEPSR, Davis Auditorium
ABSTRACT
The Heston stochastic volatility model is among the most important models in both the theory and practice of financial engineering. After some background on the model and on the problem of simulating diffusions, we present an explicit representation of the transitions of the Heston stochastic volatility model and use it for fast and accurate simulation. Of particular interest is the integral of the variance process over an interval, conditional on the level of the variance at the endpoints. We give an explicit representation of this quantity in terms of infinite sums and
mixtures of gamma random variables. The increments of the variance process are themselves mixtures of gamma random variables. The representation of the integrated conditional variance applies the Pitman-Yor decomposition of Bessel bridges. We combine this representation with the Broadie-Kaya exact simulation method and use it to circumvent the most time-consuming step in
that method. This is joint work with Kyoung-Kuk Kim of Barclays Capital.
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