Resumen

ORTIZ-RAMIREZ, Ambrosio; VENEGAS-MARTINEZ, Francisco  y  MARTINEZ-PALACIOS, María Teresa Verónica. Parameter calibration of stochastic volatility Heston’s model: Constrained optimization vs. differential evolution. Contad. Adm [online]. 2022, vol.67, n.1, pp.40-67.  Epub 10-Sep-2024. ISSN 0186-1042.  https://doi.org/10.22201/fca.24488410e.2022.2789.

This paper calibrates through loss functions the parameters of Heston’s stochastic volatility model by using two different methods: minimizing a nonlinear objective function (a loss function) with constraints on the values of the parameter and using a differential evolution algorithm. Both methods are applied to implied volatilities on the Mexican Stock Exchange Index with four maturities and twenty-eight strike prices. The selection criterion for the parameters is minimizing the value of the mean square error of the implied volatility. The first method has a better performance with less error and time. However, empirical results show that for both methods the adjustment of implied volatilities is better for options with longterm maturities than for short-term maturities.

Palabras llave : Contingent pricing; Stochastic volatility; Implied volatility; Differential evolution.

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