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Application of the heston and hull-white models to german dax data 

Authors: Ralf Remer a; Reinhard Mahnke a
Affiliation:   a University of Rostock, Department of Physics, D-18051 Rostock, Germany
DOI: 10.1080/14697680500040256
Publication Frequency: 8 issues per year
Published in: journal Quantitative Finance, Volume 4, Issue 6 December 2004 , pages 685 - 693
Number of References: 21
Formats available: HTML (English) : PDF (English)
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Abstract

We focus on the stochastic description of stock price dynamics and concentrate on the Heston and Hull-White models. We derive the stationary probability density distribution of the variance of both models in the case of the zero correlation coefficient. These distributions are used to calculate solutions for the logarithmic returns of the stock price for short time lags. Furthermore, we compare the received results with numerical simulations. In addition, we apply the solutions of both models to tick-by-tick German Dax data. The data are from May 1996 to December 2001. We use the probability density distributions of the logarithmic returns calculated from the data and fit them to the theoretical distributions.
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