# Heston Model

*Quant & Pricing — Finicade finance glossary*

The Heston model prices options with volatility that is itself random and mean-reverting, rather than the constant Black-Scholes assumes. Because it allows the volatility shock to correlate with the price shock, it reproduces the observed skew — down moves come with rising vol — and it has a semi-analytic solution, which makes calibration fast. Its known weakness is fitting short-dated smiles, where jump models do better.

**Also known as:** Heston, Heston stochastic volatility model

**Related terms:** [Stochastic Volatility](https://finicade.com/glossary/stochastic-volatility), [Volatility Surface](https://finicade.com/glossary/volatility-surface), [Black–Scholes Model](https://finicade.com/glossary/black-scholes), [Monte Carlo Simulation](https://finicade.com/glossary/monte-carlo), [Model Calibration](https://finicade.com/glossary/model-calibration)

**Taught in:** Quant Quest — Local & Stochastic Volatility

Source: https://finicade.com/glossary/heston-model