Series Representation of conditional integral of the variance Process in the Heston Stochastic Volatility Model

We present a new series representation for the time integral of the variance process of the Heston stochastic volatility model conditional on its values at the endpoints through the decomposition of the Bessel bridges and... [ view full abstract ]

We present a new series representation for the time integral of the variance process of the Heston stochastic volatility model conditional on its values at the endpoints through the decomposition of the Bessel bridges and change of a measure. We represent this quantity by double infinite weighted sums of certain independent random variables. Furthermore, we simulate part of the representation by inverse distribution function, which is approximated by Chebyshev polynomials based on an asymptotic series expansion we derive for the distribution function.