No-arbitrage, leverage and completeness in a fractional volatility model

When the volatility process is driven by fractional noise one obtains a model which is consistent with the empirical market data. 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 behaviors. Here, the no-arbitrage and completeness properties of the models are rigorously studied.

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Year of publication:	2015
Authors:	Vilela Mendes, R. ; Oliveira, M.J. ; Rodrigues, A.M.
Published in:	Physica A: Statistical Mechanics and its Applications. - Elsevier, ISSN 0378-4371. - Vol. 419.2015, C, p. 470-478
Publisher:	Elsevier
Subject:	Fractional noise \| Arbitrage \| Market completeness

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011117922