What is “Lambda” in Heston's original paper on stochastic volatility models?












1












$begingroup$


In his paper (link), he has the equations:




b1 = k + ƛ - (ρ * σ)



b2 = k + ƛ




k is the rate of mean reversion, ρ is the correlation between the two Wiener processes, σ is vol of vol, what is ƛ?



I have yet to figure out what ƛ is.



Thanks!






options stochastic-processes







share|improve this question











$endgroup$

















    1












    $begingroup$


    In his paper (link), he has the equations:




    b1 = k + ƛ - (ρ * σ)



    b2 = k + ƛ




    k is the rate of mean reversion, ρ is the correlation between the two Wiener processes, σ is vol of vol, what is ƛ?



    I have yet to figure out what ƛ is.



    Thanks!






    options stochastic-processes







    share|improve this question











    $endgroup$















      1












      1








      1





      $begingroup$


      In his paper (link), he has the equations:




      b1 = k + ƛ - (ρ * σ)



      b2 = k + ƛ




      k is the rate of mean reversion, ρ is the correlation between the two Wiener processes, σ is vol of vol, what is ƛ?



      I have yet to figure out what ƛ is.



      Thanks!






      options stochastic-processes







      share|improve this question











      $endgroup$




      In his paper (link), he has the equations:




      b1 = k + ƛ - (ρ * σ)



      b2 = k + ƛ




      k is the rate of mean reversion, ρ is the correlation between the two Wiener processes, σ is vol of vol, what is ƛ?



      I have yet to figure out what ƛ is.



      Thanks!






      options stochastic-processes




      options stochastic-processes






      share|improve this question















      share|improve this question













      share|improve this question




      share|improve this question








      edited 2 hours ago









      Alex C

      6,73211123




      6,73211123










      asked 2 hours ago









      vt_ogvt_og

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          $begingroup$

          It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:



          enter image description here






          share|improve this answer









          $endgroup$





















            0












            $begingroup$

            That is the "price of volatility risk" (see Page 329)






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              2 Answers
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              2 Answers
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              active

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              1












              $begingroup$

              It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:



              enter image description here






              share|improve this answer









              $endgroup$


















                1












                $begingroup$

                It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:



                enter image description here






                share|improve this answer









                $endgroup$
















                  1












                  1








                  1





                  $begingroup$

                  It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:



                  enter image description here






                  share|improve this answer









                  $endgroup$



                  It is on page 329 (which is the third page of the article) and represents the market price of volatility risk. I have copied below from the original article:



                  enter image description here







                  share|improve this answer












                  share|improve this answer



                  share|improve this answer










                  answered 2 hours ago









                  Magic is in the chainMagic is in the chain

                  1,05915




                  1,05915























                      0












                      $begingroup$

                      That is the "price of volatility risk" (see Page 329)






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                        0












                        $begingroup$

                        That is the "price of volatility risk" (see Page 329)






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                          $begingroup$

                          That is the "price of volatility risk" (see Page 329)






                          share|improve this answer









                          $endgroup$



                          That is the "price of volatility risk" (see Page 329)







                          share|improve this answer












                          share|improve this answer



                          share|improve this answer










                          answered 2 hours ago









                          Alex CAlex C

                          6,73211123




                          6,73211123






























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