{"product_id":"the-heston-model-and-its-extensions-in-vba-isbn-9781119003304","title":"The Heston Model and Its Extensions in VBA","description":"\u003cb\u003ePractical options pricing for better-informed investment decisions.\u003c\/b\u003e  \u003cp\u003e\u003ci\u003eThe Heston Model and Its Extensions in VBA\u003c\/i\u003e is the definitive guide to options pricing using two of the derivatives industry's most powerful modeling tools—the Heston model, and VBA. Light on theory, this extremely useful reference focuses on implementation, and can help investors more efficiently—and accurately—exploit market information to better inform investment decisions. Coverage includes a description of the Heston model, with specific emphasis on equity options pricing and variance modeling, The book focuses not only on the original Heston model, but also on the many enhancements and refinements that have been applied to the model, including methods that use the Fourier transform, numerical integration schemes, simulation, methods for pricing American options, and much more. The companion website offers pricing code in VBA that resides in an extensive set of Excel spreadsheets.\u003c\/p\u003e \u003cp\u003eThe Heston model is the derivatives industry's most popular stochastic volatility model for pricing equity derivatives. This book provides complete guidance toward the successful implementation of this valuable model using the industry's ubiquitous financial modeling software, giving users the understanding—and VBA code—they need to produce option prices that are more accurate, and volatility surfaces that more closely reflect market conditions.\u003c\/p\u003e \u003cp\u003eDerivatives pricing is often the hinge on which profit is made or lost in financial institutions, making accuracy of utmost importance. This book will help risk managers, traders, portfolio managers, quants, academics and other professionals better understand the Heston model and its extensions, in a writing style that is clear, concise, transparent and easy to understand. For better pricing accuracy, \u003ci\u003eThe Heston Model and Its Extensions in VBA\u003c\/i\u003e is a crucial resource for producing more accurate model outputs such as prices, hedge ratios, volatilities, and graphs.\u003c\/p\u003e \u003cp\u003eForeword xi\u003c\/p\u003e \u003cp\u003ePreface xiii\u003c\/p\u003e \u003cp\u003eAcknowledgments xv\u003c\/p\u003e \u003cp\u003eAbout This Book xvii\u003c\/p\u003e \u003cp\u003eVBA Library for Complex Numbers xix\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 1 The Heston Model for European Options 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eModel Dynamics 1\u003c\/p\u003e \u003cp\u003eThe Heston European Call Price 2\u003c\/p\u003e \u003cp\u003eDividend Yield and the Put Price 8\u003c\/p\u003e \u003cp\u003eConsolidating the Integrals 9\u003c\/p\u003e \u003cp\u003eBlack-Scholes as a Special Case 10\u003c\/p\u003e \u003cp\u003eConclusion 12\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 2 Integration Issues, Parameter Effects, and Variance Modeling 13\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRemarks on the Characteristic Functions 14\u003c\/p\u003e \u003cp\u003eProblems with the Integrand 16\u003c\/p\u003e \u003cp\u003eThe Little Heston Trap 18\u003c\/p\u003e \u003cp\u003eEffect of the Heston Parameters 20\u003c\/p\u003e \u003cp\u003eVariance Modeling in the Heston Model 26\u003c\/p\u003e \u003cp\u003eMoment Explosions 38\u003c\/p\u003e \u003cp\u003eBounds on Implied Volatility Slope 40\u003c\/p\u003e \u003cp\u003eConclusion 42\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 3 Derivations Using the Fourier Transform 45\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eDerivation of Gatheral (2006) 46\u003c\/p\u003e \u003cp\u003eAttari (2004) Representation 47\u003c\/p\u003e \u003cp\u003eCarr and Madan (1999) Representation 49\u003c\/p\u003e \u003cp\u003eConclusion 61\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 4 The Fundamental Transform for Pricing Options 63\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Payoff Transform 64\u003c\/p\u003e \u003cp\u003eOption Prices Using Parseval’s Identity 70\u003c\/p\u003e \u003cp\u003eVolatility of Volatility Series Expansion 75\u003c\/p\u003e \u003cp\u003eConclusion 81\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 5 Numerical Integration Schemes 83\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Integrand in Numerical Integration 84\u003c\/p\u003e \u003cp\u003eNewton-Cotes Formulas 85\u003c\/p\u003e \u003cp\u003eGaussian Quadrature 90\u003c\/p\u003e \u003cp\u003eIntegration Limits, Multidomain Integration, and Kahl and Jäckel Transformation 98\u003c\/p\u003e \u003cp\u003eIllustration of Numerical Integration 103\u003c\/p\u003e \u003cp\u003eFast Fourier Transform 106\u003c\/p\u003e \u003cp\u003eFractional Fast Fourier Transform 108\u003c\/p\u003e \u003cp\u003eConclusion 114\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 6 Parameter Estimation 115\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eEstimation Using Loss Functions 116\u003c\/p\u003e \u003cp\u003eSpeeding Up the Estimation 126\u003c\/p\u003e \u003cp\u003eDifferential Evolution 128\u003c\/p\u003e \u003cp\u003eMaximum Likelihood Estimation 132\u003c\/p\u003e \u003cp\u003eRisk-Neutral Density and Arbitrage-Free Volatility Surface 135\u003c\/p\u003e \u003cp\u003eConclusion 140\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 7 Simulation in the Heston Model 143\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eGeneral Setup 144\u003c\/p\u003e \u003cp\u003eEuler Scheme 146\u003c\/p\u003e \u003cp\u003eMilstein Scheme 147\u003c\/p\u003e \u003cp\u003eImplicit Milstein Scheme 149\u003c\/p\u003e \u003cp\u003eTransformed Volatility Scheme 152\u003c\/p\u003e \u003cp\u003eBalanced, Pathwise, and IJK Schemes 155\u003c\/p\u003e \u003cp\u003eQuadratic-Exponential Scheme 157\u003c\/p\u003e \u003cp\u003eAlfonsi Scheme for the Variance 161\u003c\/p\u003e \u003cp\u003eMoment-Matching Scheme 165\u003c\/p\u003e \u003cp\u003eConclusion 167\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 8 American Options 169\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eLeast-Squares Monte Carlo 169\u003c\/p\u003e \u003cp\u003eThe Explicit Method 174\u003c\/p\u003e \u003cp\u003eBeliaeva-Nawalkha Bivariate Tree 178\u003c\/p\u003e \u003cp\u003eMedvedev-Scaillet Expansion 191\u003c\/p\u003e \u003cp\u003eChiarella and Ziogas American Call 200\u003c\/p\u003e \u003cp\u003eConclusion 208\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 9 Time-Dependent Heston Models 209\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eGeneralization of the Riccati Equation 209\u003c\/p\u003e \u003cp\u003eBivariate Characteristic Function 210\u003c\/p\u003e \u003cp\u003eLinking the Bivariate CF and the General Riccati Equation 212\u003c\/p\u003e \u003cp\u003eMikhailov and Nögel Model 214\u003c\/p\u003e \u003cp\u003eElices Model 219\u003c\/p\u003e \u003cp\u003eBenhamou-Miri-Gobet Model 223\u003c\/p\u003e \u003cp\u003eBlack-Scholes Derivatives 231\u003c\/p\u003e \u003cp\u003eConclusion 232\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 10 Methods for Finite Differences 235\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe PDE in Terms of an Operator 236\u003c\/p\u003e \u003cp\u003eBuilding Grids 236\u003c\/p\u003e \u003cp\u003eFinite Difference Approximation of Derivatives 239\u003c\/p\u003e \u003cp\u003eBoundary Conditions for the PDE 240\u003c\/p\u003e \u003cp\u003eThe Weighted Method 241\u003c\/p\u003e \u003cp\u003eExplicit Scheme 248\u003c\/p\u003e \u003cp\u003eADI Schemes 251\u003c\/p\u003e \u003cp\u003eConclusion 256\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 11 The Heston Greeks 257\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAnalytic Expressions for European Greeks 258\u003c\/p\u003e \u003cp\u003eFinite Differences for the Greeks 263\u003c\/p\u003e \u003cp\u003eNumerical Implementation of the Greeks 264\u003c\/p\u003e \u003cp\u003eGreeks under the Attari and Carr-Madan Formulations 267\u003c\/p\u003e \u003cp\u003eGreeks under the Lewis Formulations 273\u003c\/p\u003e \u003cp\u003eGreeks Using the FFT and FRFT 276\u003c\/p\u003e \u003cp\u003eAmerican Greeks Using Simulation 279\u003c\/p\u003e \u003cp\u003eAmerican Greeks Using the Explicit Method 281\u003c\/p\u003e \u003cp\u003eAmerican Greeks from Medvedev and Scaillet 284\u003c\/p\u003e \u003cp\u003eConclusion 285\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 12 The Double Heston Model 287\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eMultidimensional Feynman-Kac Theorem 288\u003c\/p\u003e \u003cp\u003eDouble Heston Call Price 288\u003c\/p\u003e \u003cp\u003eDouble Heston Greeks 292\u003c\/p\u003e \u003cp\u003eParameter Estimation 297\u003c\/p\u003e \u003cp\u003eSimulation in the Double Heston Model 301\u003c\/p\u003e \u003cp\u003eAmerican Options in the Double Heston Model 306\u003c\/p\u003e \u003cp\u003eConclusion 308\u003c\/p\u003e \u003cp\u003eBibliography 309\u003c\/p\u003e \u003cp\u003eAbout the Website 317\u003c\/p\u003e \u003cp\u003eIndex 319\u003c\/p\u003e   \u003cp\u003e\u003cb\u003eFABRICE DOUGLAS ROUAH\u003c\/b\u003e was a quantitative analyst who specialized in financial modeling of derivatives for pricing and risk management at Sapient Global Markets, a global consultancy. Prior to joining Sapient, Rouah worked at State Street Corporation and McGill University. He is the coauthor and\/or coeditor of five books on hedge funds, commodity trading advisors, and option pricing. Rouah holds a PhD in finance and an MSc in statistics from McGill University, and a BSc in applied mathematics from Concordia University.     \u003c\/p\u003e\u003cp\u003e\u003cb\u003ePraise for The Heston Model and Its Extensions in VBA\u003c\/b\u003e  \u003c\/p\u003e\u003cp\u003e\"In his excellent new book, Fabrice Rouah provides a careful presentation of all aspects of the Heston model, with a strong emphasis on getting the model up and running in practice. This highly practical and useful book is recommended for anyone working with stochastic volatility models.\" \u003cbr\u003e—Leif B. G. Andersen, Bank of America Merrill Lynch  \u003c\/p\u003e\u003cp\u003e\"Without a doubt, Fabrice provides a very valuable contribution to quantitative analysts interested in pricing options with state-of-the art techniques.\" \u003cbr\u003e—Marco Avellaneda, New York University  \u003c\/p\u003e\u003cp\u003e\"The Heston model is one of the great success stories of academic finance. Rouah's impressive book provides users with all the tools required to implement the Heston model, and wonderfully bridges the gap between academia and practice.\" \u003cbr\u003e—Peter Christoffersen, University of Toronto  \u003c\/p\u003e\u003cp\u003e\"In this encyclopedic work, the author takes delight in exploring every aspect of the Heston model. Together with its code, this book will prove invaluable to anyone interested in option pricing. I highly recommend it.\" \u003cbr\u003e—Jim Gatheral, Baruch College, author of \u003ci\u003eThe Volatility Surface: A Practitioner's Guide\u003c\/i\u003e  \u003c\/p\u003e\u003cp\u003e\"This is the most extensive work on the Heston model I have seen: derivations, implementations, and discussions. For anyone interested in the Heston model and its variations, this is an important book to have!\" \u003cbr\u003e—Espen Gaarder Haug, Norwegian University of Life Sciences, author of \u003ci\u003eDerivatives Models on Models\u003c\/i\u003e  \u003c\/p\u003e\u003cp\u003e\"Rouah offers a unique and much needed synthesis of the literature regarding Heston's model of stochastic volatility. The author has accomplished the formidable task of presenting a large body of published academic and industrial research in a coherent, thorough, and very reader-friendly manner.\" \u003cbr\u003e—Andrew Lesniewski, DTCC  \u003c\/p\u003e\u003cp\u003e\"Beyond Black-Scholes, the Heston model is arguably the most important model in quantitative finance and certainly deserves its own book. Rouah provides here a comprehensive treatment—clearly discussing all the major issues, later extensions, and subtle traps.\" \u003cbr\u003e—Alan L. Lewis, PhD, author of \u003ci\u003eOption Valuation Under Stochastic Volatility: With Mathematica Code\u003c\/i\u003e\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47990257615077,"sku":"NP9781119003304","price":150.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781119003304.jpg?v=1761787093","url":"https:\/\/k12savings.com\/products\/the-heston-model-and-its-extensions-in-vba-isbn-9781119003304","provider":"K12savings","version":"1.0","type":"link"}