English

Inhomogeneous affine Volterra processes

Probability 2020-12-22 v1

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 K(t,s)K(t,s) and inhomogeneous drift and diffusion coefficients b(s,Xs)b(s,X_s) and σ(s,Xs)\sigma(s,X_s). In the case of affine bb and σσT\sigma \sigma^T 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 K(t,s)=K(ts)K(t,s)=\overline{K}(t-s) we establish existence of a solution to the stochastic inhomogeneous Volterra equation. If in addition bb and σσT\sigma \sigma^T 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}
}
R2 v1 2026-06-23T21:06:36.679Z