The Heston model is a stochastic volatility process where the noise term for
the variance dynamic is modulated by the volatility. The equations are:

where σeff^{2}(t) is an annualized variance, σ∞^{2} fixes the mean annualized variance, τ
sets the mean reversion time to the mean variance, and γ is the mean noise level.
The main interest of the model is that an exact solution for the European option
price can be computed when the residues ϵ_{r} and ϵ_{σ} are Gaussian, see Heston and
Nandi [2000].

The parameters for the simulations are:

σ∞ = 0.11.

τ = 4 days.

γ = 1.65

p(ϵ_{r}), p(ϵ_{σ}): normal distributions.

The simulation time corresponds to 200 years with a time increment δt = 3
minutes.

References

S. Heston and S. Nandi. A closed-form GARCH option pricing model.
Review of Financial Studies, 13:585–626, 2000.