Essec\Faculty\Model\Contribution {#2216
  #_index: "academ_contributions"
  #_id: "13710"
  #_source: array:26 [
    "id" => "13710"
    "slug" => "smiling-twice-the-heston-model"
    "yearMonth" => "2018-11"
    "year" => "2018"
    "title" => "Smiling twice: The Heston++ model"
    "description" => "PACATI, C., POMPA, G. et RENO, R. (2018). Smiling twice: The Heston++ model. <i>Journal of Banking & Finance</i>, 96, pp. 185-206."
    "authors" => array:3 [
      0 => array:3 [
        "name" => "RENO Roberto"
        "bid" => "B00798674"
        "slug" => "reno-roberto"
      ]
      1 => array:1 [
        "name" => "PACATI Claudio"
      ]
      2 => array:1 [
        "name" => "POMPA Gabriele"
      ]
    ]
    "ouvrage" => ""
    "keywords" => array:6 [
      0 => "VIX options"
      1 => "VIX futures"
      2 => "Heston model"
      3 => "Stochastic volatility"
      4 => "Jump-diffusion"
      5 => "Displacement"
    ]
    "updatedAt" => "2023-02-07 01:00:47"
    "publicationUrl" => "https://doi.org/10.1016/j.jbankfin.2018.08.010"
    "publicationInfo" => array:3 [
      "pages" => "185-206"
      "volume" => "96"
      "number" => ""
    ]
    "type" => array:2 [
      "fr" => "Articles"
      "en" => "Journal articles"
    ]
    "support_type" => array:2 [
      "fr" => "Revue scientifique"
      "en" => "Scientific journal"
    ]
    "countries" => array:2 [
      "fr" => null
      "en" => null
    ]
    "abstract" => array:2 [
      "fr" => "We recommend the addition of a deterministic displacement to multi-factor affine models to calibrate and hedge SPX and VIX derivatives jointly. The proposed model, labeled Heston++, calibrates both markets with an average relative error (on quoted implied volatilities over two years of data) of 2%, and a maximum relative error of 4%, without additional computational costs with respect to traditional affine benchmarks. Hedging performance on both markets is also drastically improved. The displacement can be interpreted as a volatility push-up reflecting expectations about a (risk-neutral) lower bound on forward VIX dynamics. Our empirical results document substantial correlation between the dynamics of the displacement and the variance risk premium, and still provide strong support for the presence of both price/volatility negatively correlated co-jumps and idiosyncratic jumps in the volatility dynamics, even when the displacement is added."
      "en" => "We recommend the addition of a deterministic displacement to multi-factor affine models to calibrate and hedge SPX and VIX derivatives jointly. The proposed model, labeled Heston++, calibrates both markets with an average relative error (on quoted implied volatilities over two years of data) of 2%, and a maximum relative error of 4%, without additional computational costs with respect to traditional affine benchmarks. Hedging performance on both markets is also drastically improved. The displacement can be interpreted as a volatility push-up reflecting expectations about a (risk-neutral) lower bound on forward VIX dynamics. Our empirical results document substantial correlation between the dynamics of the displacement and the variance risk premium, and still provide strong support for the presence of both price/volatility negatively correlated co-jumps and idiosyncratic jumps in the volatility dynamics, even when the displacement is added."
    ]
    "authors_fields" => array:2 [
      "fr" => "Systèmes d'Information, Data Analytics et Opérations"
      "en" => "Information Systems, Data Analytics and Operations"
    ]
    "indexedAt" => "2024-11-21T14:21:49.000Z"
    "docTitle" => "Smiling twice: The Heston++ model"
    "docSurtitle" => "Journal articles"
    "authorNames" => "<a href="/cv/reno-roberto">RENO Roberto</a>, PACATI Claudio, POMPA Gabriele"
    "docDescription" => "<span class="document-property-authors">RENO Roberto, PACATI Claudio, POMPA Gabriele</span><br><span class="document-property-authors_fields">Information Systems, Data Analytics and Operations</span> | <span class="document-property-year">2018</span>"
    "keywordList" => "<a href="#">VIX options</a>, <a href="#">VIX futures</a>, <a href="#">Heston model</a>, <a href="#">Stochastic volatility</a>, <a href="#">Jump-diffusion</a>, <a href="#">Displacement</a>"
    "docPreview" => "<b>Smiling twice: The Heston++ model</b><br><span>2018-11 | Journal articles </span>"
    "docType" => "research"
    "publicationLink" => "<a href="https://doi.org/10.1016/j.jbankfin.2018.08.010" target="_blank">Smiling twice: The Heston++ model</a>"
  ]
  +lang: "en"
  +"_type": "_doc"
  +"_score": 8.690205
  +"parent": null
}