Reconstructing volatility: Pricing of index options under rough volatility

Avellaneda et al. (2002, 2003) pioneered the pricing and hedging of index options – products highly sensitive to implied volatility and correlation assumptions – with large deviations methods, assuming local volatility dynamics for all components of the index. We present an extension applicable to non‐Markovian dynamics and in particular the case of rough volatility dynamics.

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Year of publication:	2023
Authors:	Friz, Peter K. ; Wagenhofer, Thomas
Published in:	Mathematical Finance. - Hoboken, NJ : Wiley, ISSN 1467-9965. - Vol. 33.2023, 1, p. 19-40
Publisher:	Hoboken, NJ : Wiley

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Type of publication:	Article
Type of publication (narrower categories):	Article
Language:	English
Other identifiers:	10.1111/mafi.12374 [DOI]
Source:	EconStor

Persistent link: https://www.econbiz.de/10014503588