Heston Stochastic Volatility Model

The Heston Stochastic Volatility Model is a mathematical framework used in finance to describe how the price of an asset, like a stock, evolves over time. Unlike traditional models that assume volatility (the fluctuations in price) is constant, the Heston model treats volatility as a variable that changes randomly, capturing the real-world behavior where market turbulence varies. It accounts for the fact that high volatility often leads to more market movement, and it helps traders better price options and manage risk by realistically modeling these fluctuating conditions.