A Data-Reconstructed Fractional Volatility Model

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.

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Year of publication:	2008
Authors:	Mendes, Rui Vilela ; Oliveira, Maria J.
Institutions:	Institut für Weltwirtschaft (IfW)
Subject:	Fractional noise \| induced volatility \| statistics of returns \| option pricing

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Extent:	application/pdf
Series:	Economics Discussion Papers. - ISSN 1867-8009.
Type of publication:	Book / Working Paper
Notes:	Number 2008-22
Classification:	C51 - Model Construction and Estimation ; G14 - Information and Market Efficiency; Event Studies ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005083402