The fractional volatility model: No-arbitrage, leverage and completeness

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.

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Year of publication:	2012-05
Authors:	Mendes, R. Vilela ; Oliveira, M. J. ; Rodrigues, A. M.
Institutions:	arXiv.org

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Extent:	application/pdf
Series:	Papers.
Type of publication:	Book / Working Paper
Notes:	Published in Physica A 419 (2015) 470-478
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011155360