Group Quantization and Mellin Representations of the Heston Model

Abstract

We construct a lifted local Lie groupoid formulation of the Heston stochastic-volatility model and use it to give a geometric interpretation of its affine-transform structure. The construction extends the Group Quantization framework previoulsy applied to quadratic financial diffusion models. The purpose of this paper is not to propose a new Heston pricing formula. The contribution is geometric: the Heston pricing operator in coordinate space and the Riccati equations in momentum space arise from two representations of the same lifted local groupoid construction. The usual characteristic-function and Riccati formulas are recovered.