Regensburg 2004 – scientific programme

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AKSOE: Physik sozio-ökonomischer Systeme

AKSOE 1: Finanzm
ärkte und Risikomanagement

AKSOE 1.5: Talk

Monday, March 8, 2004, 12:00–12:30, H8

Application of Heston and Hull-White model to German DAX data — •Ralf Remer and Reinhard Mahnke — University of Rostock, Department of Physics, 18051 Rostock

We concentrate on the stock price dynamics described by the Heston and the Hull -White model [1]. We apply the model to the German tick-by-tick DAX data [2]. The data are from May 1996 to December 2001.

We compare the short and the long time solution of the Heston model [3] with the DAX data and with numerical simulations of the Heston model. Therefore we use the probability density distributions of the logarithmic returns, calculated out of the data, and fit these distributions with the theoretical distribution.

Finally we compare the short-time solution of the Heston model and of the Hull-White model as another example of the models with stochastic volatility.

[1] Fouque, J P, Papanicolaou G and Sircar K R 2000 Derivatives in Financial Markets with Stochastic Volatility (Cambridge: Cambridge University Press)

[2] Karlsruher Kapitalmarktdatenbank 2002 DAX and its stock prices (Universität Karlsruhe)