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Hard · options_pricing · Quant Researcher interview question · heston_model, stochastic_volatility, characteristic_function, numerical_integration, options_pricing
The Heston stochastic volatility model is a cornerstone in quantitative finance for options pricing, addressing the limitations of Black-Scholes by incorporating a mean-reverting variance process correlated with asset returns. Its semi-analytical solution, derived via characteristic functions and numerical integration, allows for efficient calibration and real-time application. This model is crucial for tasks like volatility surface fitting, exotic option hedging, and generating model-implied si