This paper proposes a testing procedure in order to distinguish between the case where the volatility of an asset price is a deterministic function of the price itself and the one where it is a function of one or more (possibly unobservable) factors, driven by not perfectly correlated Brownian...

This paper proposes a procedure to test for the correct specification of the functional form of the volatility process, within the class of eigenfunction stochastic volatility models (Meddahi, 2001). The procedure is based on the comparison of the moments of realized volatility measures with the...