How to create Heston Stochastic Volatility Models in MATLAB

(Last Updated On: August 2, 2010)

How to create Heston Stochastic Volatility Models in MATLAB

From the Matlab Econometric toolbox help system:

The Heston (heston) class derives directly from SDE from Drift and Diffusion (SDEDDO). Each Heston model is a bivariate composite model, consisting of two coupled univariate models:


Equation 10-5 is typically associated with a price process. Equation 10-6 represents the evolution of the price process’ variance. Models of type heston are typically used to price equity options.

Example: Heston Models. Create a heston object to represent the model:

obj = heston (0.1, 0.2, 0.1, 0.05)
obj =

Class HESTON: Heston Bi-Variate Stochastic Volatility
Dimensions: State = 2, Brownian = 2
StartTime: 0
StartState: 1 (2×1 double array)
Correlation: 2×2 diagonal double array
Drift: drift rate function F(t,X(t))
Diffusion: diffusion rate function G(t,X(t))
Simulation: simulation method/function simByEuler
Return: 0.1
Speed: 0.2
Level: 0.1
Volatility: 0.05

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Subscribe For Latest Updates

Sign up to best of business news, informed analysis and opinions on what matters to you.
Invalid email address
We promise not to spam you. You can unsubscribe at any time.


Check NEW site on stock forex and ETF analysis and automation

Scroll to Top