Goodness-of-fit of the Heston model

An analytical formula for the probability distribution of stock-market returns, derived from the Heston model assuming a mean-reverting stochastic volatility, was recently proposed by Dragulescu and Yakovenko in Quantitative Finance 2002. While replicating their results, we found two significant weaknesses in their method to pre-process the data, which cast a shadow over the effective goodness-of-fit of the model. We propose a new method, more truly capturing the market, and perform a Kolmogorov...