Moment explosions in the rough Heston model

Stefan Gerhold (), Christoph Gerstenecker () and Arpad Pinter
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Stefan Gerhold: TU Wien
Christoph Gerstenecker: TU Wien
Arpad Pinter: TU Wien

Decisions in Economics and Finance, 2019, vol. 42, issue 2, No 10, 575-608

Abstract: Abstract We show that the moment explosion time in the rough Heston model, introduced by El Euch and Rosenbaum in 2016, is finite if and only if it is finite for the classical Heston model. Upper and lower bounds for the explosion time are established, as well as an algorithm to compute the explosion time (under some restrictions). We show that the critical moments are finite for all maturities. For negative correlation, we apply our algorithm for the moment explosion time to compute the lower critical moment.

Keywords: Option pricing; Rough volatility; Rough Heston model; Moment explosion; Volterra integral equation; 91G20; 45D05 (search for similar items in EconPapers)
JEL-codes: C65 G13 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10203-019-00267-6

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