The fractional volatility model: No-arbitrage, leverage and completeness
Statistical Finance
2015-06-05 v1
Abstract
Based on a criterion of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity generators of log-price and volatility are independent or are the same, two versions of the model are obtained with different leverage behavior. Here, the no-arbitrage and completeness properties of the models are studied.
Cite
@article{arxiv.1205.2866,
title = {The fractional volatility model: No-arbitrage, leverage and completeness},
author = {R. Vilela Mendes and M. J. Oliveira and A. M. Rodrigues},
journal= {arXiv preprint arXiv:1205.2866},
year = {2015}
}
Comments
13 pages Latex. arXiv admin note: substantial text overlap with arXiv:1007.2817