Inhomogeneous affine Volterra processes
Abstract
We extend recent results on affine Volterra processes to the inhomogeneous case. This includes moment bounds of solutions of Volterra equations driven by a Brownian motion with an inhomogeneous kernel and inhomogeneous drift and diffusion coefficients and . In the case of affine and we show how the conditional Fourier-Laplace functional can be represented by a solution of an inhomogeneous Riccati-Volterra integral equation. For a kernel of convolution type we establish existence of a solution to the stochastic inhomogeneous Volterra equation. If in addition and are affine, we prove that the conditional Fourier-Laplace functional is exponential-affine in the past path. Finally, we apply these results to an inhomogeneous extension of the rough Heston model used in mathematical finance.
Keywords
Cite
@article{arxiv.2012.10966,
title = {Inhomogeneous affine Volterra processes},
author = {Julia Ackermann and Thomas Kruse and Ludger Overbeck},
journal= {arXiv preprint arXiv:2012.10966},
year = {2020}
}