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Volatility Surface in the Heston Model
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Abstract
The plot shows the volatility surface generated by the Heston stochastic volatility model Heston 1993 This is implied volatility based on the Heston price which depends on the time to expiration and on moneyness Recall that for a call option moneyness is the ratio of spot price to strike price The Heston model is described by the following stochastic differential equations SDE where and are correl