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.
Publisher:	Kiel : Kiel Institute for the World Economy (IfW)
Subject:	Börsenkurs \| Volatilität \| Stochastischer Prozess \| Noise Trading \| Optionspreistheorie \| Theorie \| Fractional noise \| induced volatility \| statistics of returns \| option pricing

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Series:	Economics Discussion Papers ; 2008-22
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	566318539 [GVK] hdl:10419/17994 [Handle] RePEc:zbw:ifwedp:7284 [RePEc]
Classification:	C51 - Model Construction and Estimation ; G14 - Information and Market Efficiency; Event Studies ; G12 - Asset Pricing
Source:	EconStor

Persistent link: https://www.econbiz.de/10010295279