[Quantlib-dev] Heston and ExactVariance

[Dima <dim...@go...>]

Hi All,

I appologize for the frequency of the initialized discussions, but I'm
browsing through a lot of
QuantLib code and need to discuss the issues. I hope that nobody is annoyed
and the
discussions add some value to the library.

I had a look at Heston and the exact variance method. There were some
questions on Wilmott
about what the code does and some user requests. As far as I can see this is
not the method
proposed by Broadie and Kaya in "Exact Simulation of stochastic
volatility..." which is what
is commonly understood as the exact simulation approach. Which might be
misleading. And
I didn't find out what is actually done and if there is some approximation
happening. Can anyone
elaborate?

As a side note: I don't think it is good coding practice to pass normal
random variables to "evolve"
and transform them to other variables within the code. What is often done
is: take normal, take
cdf to get uniform, take inverse of other cdf to get a sample of the random
number corresponding
to this cdf. Don't know how good the random variables are if generated in
that way, also the interface
will be hard to understand. I think there should rather be a way to pass the
random variables directly.

Best regards, Dima