A note on essential smoothness in the Heston model |
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| Authors: | Martin Forde Antoine Jacquier Aleksandar Mijatović |
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| Affiliation: | 1.Department of Mathematical Sciences,Dublin City University,Dublin,Ireland;2.Department of Mathematics,TU Berlin,Berlin,Germany;3.Department of Statistics,University of Warwick,Warwick,UK |
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| Abstract: | This note identifies a gap in the proof of Corollary 2.4 in Forde and Jacquier (Finance Stoch., 2011) which arises because the essential smoothness of the family (X t /t) t≥1 can fail for the log-spot process X in the Heston model, and it describes how to circumvent the issue by applying a standard argument from large deviation theory. |
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