A data-reconstructed fractional volatility model
Probability
2008-12-02 v2 Other Condensed Matter
Statistics Theory
Statistical Finance
Statistics Theory
Abstract
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior are derived from the model and compared with data. Deviations from Black-Scholes and a new option pricing formula are also obtained
Cite
@article{arxiv.math/0602013,
title = {A data-reconstructed fractional volatility model},
author = {Rui Vilela Mendes and M. J. Oliveira},
journal= {arXiv preprint arXiv:math/0602013},
year = {2008}
}
Comments
19 pages, 7 figures