The Heston Model is a mathematical framework used to describe the evolution of financial assets with stochastic volatility, where the volatility itself is assumed to be a random process. This model enhances traditional pricing models by capturing the empirical features of asset prices, like the volatility smile, and is widely applied in options pricing and risk management. The unique aspect of the Heston Model is its ability to model how both the price of the asset and its volatility change over time, providing a more dynamic representation of market behavior.
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