Comment on: A Note on the Discontinuity Problem in Heston's Stochastic Volatility Model

Abstract

Guo and Hung (2007 Guo, J.-H. and Hung, M.-W. 2007. A note on the discontinuity problem in Heston's stochastic volatility model. Applied Mathematical Finance, 14(4): 339–345. Taylor & Francis Online] , Google Scholar]) recently studied the complex logarithm present in the characteristic function of Heston's stochastic volatility model. They proposed an algorithm for the evaluation of the characteristic function that is claimed to preserve its continuity. We show their algorithm is correct, although their proof is not.