  Exact path simulation of the underlying state variable is of great practical
importance in simulating prices of financial derivatives or their sensitivities
when there are no analytical solutions for their pricing formulas. However, in
general, the complex dependence structure inherent in most nontrivial
stochastic volatility (SV) models makes exact simulation difficult. In this
paper, we present a nontrivial SV model that parallels the notable Heston SV
model in the sense of admitting exact path simulation as studied by Broadie and
Kaya. The instantaneous volatility process of the proposed model is driven by a
Gamma process. Extensions to the model including superposition of independent
instantaneous volatility processes are studied. Numerical results show that the
proposed model outperforms the Heston model and two other L\'evy driven SV
models in terms of model fit to the real option data. The ability to exactly
simulate some of the path-dependent derivative prices is emphasized. Moreover,
this is the first instance where an infinite-activity volatility process can be
applied exactly in such pricing contexts.
