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Combined Mutiplicative-Heston Model for Stochastic Volatility

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  • M. Dashti Moghaddam
  • R. A. Serota
Abstract
We consider a model of stochastic volatility which combines features of the multiplicative model for large volatilities and of the Heston model for small volatilities. The steady-state distribution in this model is a Beta Prime and is characterized by the power-law behavior at both large and small volatilities. We discuss the reasoning behind using this model as well as consequences for our recent analyses of distributions of stock returns and realized volatility.

Suggested Citation

  • M. Dashti Moghaddam & R. A. Serota, 2018. "Combined Mutiplicative-Heston Model for Stochastic Volatility," Papers 1807.10793, arXiv.org.
    • Handle: RePEc:arx:papers:1807.10793
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    References listed on IDEAS

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    Cited by:

    1. M. Dashti Moghaddam & Zhiyuan Liu & R. A. Serota, 2019. "Distribution of Historic Market Data ¨C Implied and Realized Volatility," Applied Economics and Finance, Redfame publishing, vol. 6(5), pages 104-130, September.
    2. Dashti Moghaddam, M. & Mills, Jeffrey & Serota, R.A., 2020. "From a stochastic model of economic exchange to measures of inequality," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 559(C).
    3. M. Dashti Moghaddam & Zhiyuan Liu & R. A. Serota, 2019. "Distributions of Historic Market Data -- Relaxation and Correlations," Papers 1907.05348, arXiv.org, revised Feb 2020.

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